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■ IBC
International Bancshares
Corporation
Wedorrwre
★★
IBC
INTERNATIONAL BANCSHARES CORPORATION
ALL BANKS MEMBER FDIC
MEMBER BANKS:
International Bank Of Commerce
1200 San Bernardo Avenue
Laredo, Texas 78040
(956) 722-7611
Laredo
7002 San Bernardo Ave.
(956) 728-0060
1002 Matamoros
(956) 726-6622
1300 Guadalupe
(956) 726-6601
2418 Jacaman Rd.
(956) 764-6161
5300 San Dario Ste. 440D
(956) 728-0063
5300 San Dario Ste. 202
(956) 790-6500
9710 Mines Road
(956) 728-0092
4501 San Bernardo
(956) 722-0485
7909 McPherson Ave.
(956) 728-0064
2442 San Isidro Pkwy
(956) 726-6611
2415 S. Zapata Hwy.
(956) 728-0061
5610 San Bernardo
(956) 726-6688
2320 Bob Bullock Loop 20
(956) 728-0062
4401 Highway 83 South
(956) 794-8140
1600 Water Street, Suite
B520
(956) 794-8180
Administration Center
2418 Jacaman Rd. (Rear)
(956) 722-7611
Service Center
2416 Cee Gee
(210) 821-4700
8770 Tesoro
(210) 821-4700
San Antonio
130 East Travis
(210) 518-2500
5029 Broadway
(210) 518-2523
6630 Callaghan
(210) 518-2585
2201 NW Military Dr.
(210) 366-0617
12400 Hwy. 281 North
(210) 369-2900
16339 Huebner Rd.
(210) 369-2974
8650 Fredericksburg
(210) 930-9811
1500 NE Lp. 410
(210) 281-2430
18750 Stone Oak Pkwy
(210) 496-6111
5300 Walzem Road
(210) 564-2300
11831 Bandera Road
(210) 369-2980
3119 SE Military Drive
(210) 354-6980
327 SW Loop 410
(210) 930-9825
938 SE Military Drive
(210) 930-9815
11002 Culebra
(210) 930-9850
Marble Falls
2401 Hwy. 281 North
(830) 693-4301
San Marcos
1081 Wonder World Dr.
(512) 353-1011
2120 Saunders
(956) 724-1616
Luling
200 S. Pecan St.
(830) 875-2445
Corpus Christi
221 S. Shoreline
(361) 888-4000
6130 S. Staples
(361) 991-4000
4622 Everhart
(361) 903-7265
14066 Northwest Blvd.
(361) 903-7285
Flour Bluff
1317 Waldron Road
(361) 886-9950
Sinton
301 West Sinton
(361) 364-1230
Rockport
2701 Hwy. 35 North
(361) 729-0500
Aransas Pass
2501 W. Wheeler Ave.
(361) 729-0500
Portland
1800 US Hwy 181
(361) 886-9910
Port Lavaca
311 N. Virginia St.
(361) 552-9771
Bay City
1916 7th Street
(979) 245-5781
Victoria
6411 N. Navarro
(361) 575-8394
Houston
5615 Kirby Dr.
(713) 526-1211
Commerce Bank
5800 San Dario
Laredo, Texas 78041
(956) 724-1616
Austin
500 West 5th St.
(512) 397-4506
11400 Burnet Road Bldg. 46
(512) 397-4595
2817 E. Cesar Chavez
(512) 320-9650
12625 North IH 35 Bldg. D
(512) 397-4570
9900 South IH 35 Bldg. Y
(512) 397-4530
4025 S. FM 620
(512) 320-9575
Round Rock
1850 Gattis School Rd.
(512) 397-4521
First Equity
9606 N. Mopac Expressway Ste 100
(512) 346-8892
Cedar Park
301 W. Whitestone Blvd
(512) 397-4552
8203 S. Kirkwood
(713) 285-2163
1001 McKinney Ste. 150
(713) 285-2139
3200 Woodridge, Ste. 1350
(713) 285-2255
3939 Montrose, Ste. W
(713) 285-2195
1545 Eldridge Parkway
(713) 285-2042
Sugarland
10570 State Hwy 6
(713) 285-2285
Katy
544 West Grand Parkway
(713) 285-2034
Eagle Pass
2395 E. Main Street
(830) 773-2313
2538 E. Main Street
(830) 773-2313
439 E. Main Street
(830) 773-2313
2305 Del Rio Blvd.
(830) 773-2313
455 S. Bibb Ave. Ste. 502
(830) 773-4930
2135 East Main Street
(830) 773-4826
Del Rio
2410 Dodson St.
(830) 775-4265
1507 Veterans Blvd
(830) 775-4265
2205 Veterans Blvd, Suite E9
(830) 775-4265
1200 Welby Court
(956) 724-1616
International Bank of Commerce, Zapata
908 N. US Highway 83
Zapata, TX 78076
(956) 765-8361
Roma
1702 E. Grant St.
(956) 849-1047
Alice
2001 E. Main St.
(361) 661-1211
Rio Grande City
4015 E. Hwy. 83
(956) 487-5531
4534 E. Hwy. 83
(956) 487-5531
4031 E. Hwy 83
(956) 487-5532
Hebbronville
401 N. Smith Ave.
(361) 527-2645
Kingsville
1320 General Cavazos Blvd
(361) 516-1040
Beeville
802 E. Houston St.
(361) 358-8700
International Bank of Commerce, Brownsville
1600 Ruben Torres Blvd
Brownsville, TX 78526-1831
(956) 547-1000
Brownsville
1623 Central Blvd.
(956) 547-1000
4520A E. 14th St.
(956) 547-1300
79 E. Alton Gloor Blvd
(956) 547-1000
2370 N. Expressway
(956) 547-1000
630 E. Elizabeth St.
(956) 547-100
3600 W. Alton Gloor Blvd.
(956) 547-1000
McAllen
One S. Broadway
(956) 686-0263
7124 N. 23rd.
(956) 630-9310
301 S. 10th St.
(956) 688-3610
3600 N.10th. St.
(956) 688-3690
2200 S. 10th St. (La Plaza East)
(956) 688-3670
802 S. Jackson Road
(956) 630-9347
2200 S. 10th St. (La Plaza West)
(956) 688-3660
2225 Nolana
(956) 688-3600
1200 E. Jackson
(956) 688-3685
2800 Nolana
(956) 688-3620
2900 West Expressway 83
(956) 630-9350
South Padre Island
911 Padre Blvd.
(956) 761-6156
Port Isabel
1401 W. Hwy. 100
(956) 943-2108
Alamo
1421 West Frontage Rd.
(956) 688-3645
Alton
215 West Martin Ave.
(956) 630-9319
Edinburg
400 S. Closner
(956) 688-3640
4101 S. McColl
(956) 630-9337
1724 W. University Dr. Ste. B
(956) 688-3680
2205 W. University Dr.
(956) 630-9340
Penitas
1705 Expressway 83
(956) 688-8636
Harlingen
501 S. Dixieland Rd.
(956) 428-6902
321 S. 77th Sunshine Strip
(956) 428-6454
1801 W. Lincoln
(956) 428-4559
Mission
900 N. Bryan Rd.
(956) 688-3630
200 E. Griffin Pkwy
(956) 632-3512
2410 E. Expressway 83
(956) 688-3625
121 S. Shary Rd.
(956) 630-9365
International Bank of Commerce, Oklahoma
3817 NW Expressway, Suite 100
Oklahoma City, Ok
(405) 775-8051
Ardmore
2302 12th Ave.
(580) 223-0345
Broken Arrow
6412 S. Elm Pl.
(918) 497-2488
8112 Garnett Rd.
(918) 497-2840
Chickasha
628 W. Grand Ave.
(405) 841-2282
Claremore
1050 N. Lynn Riggs Blvd.
(918) 497-2464
Edmond
1812 E 15th St.
(405) 775-8061
421 S. Santa Fe Ave.
(405) 841-2130
Duncan
3903 N. Hwy 81
(580) 255-9055
Tulsa
1951 S. Yale Ave.
(918) 497-2452
4202 S. Garnett
(918) 497-2883
2250 E. 73rd St
(918) 497-2405
1 E. 5th St.
(918) 497-2462
8202 E. 71st St
(918) 497-2476
5302 E. Skelly Dr.
(918) 497-2472
Chandler
3108 E. 1st St.
(405) 258-2351
Oklahoma City
100 W. Park Ave.
(405) 841-2288
10500 S. Pennsylvania Ave
(405) 841-2266
2301 N. Portland Ave.
(405) 841-2116
12241 N. May Ave.
(405) 841-2341
4902 N. Western Ave.
(405) 841-2286
14001 N. McArthur Blvd
(405) 775-1710
Lawton
2101 W. Gore
(520) 250-4322
6425 NW Cache Rd.
(520) 250-4322
Miami
2520 N. Main
(918) 542-4411
Midwest City
2200 S. Douglas Blvd.
(405) 775-8057
Sapulpa
911 E. Taft St.
(918) 497-2465
Shawnee
2513 N. Harrison Ave.
(405) 775-8067
Sulphur
2009 W. Broadway Ave.
(580) 622-3118
Bethany
7723 NW 23rd St.
(405) 841-2367
Guthrie
120 N. Division St.
(405) 841-2304
Moore
901 SW 19th
(405) 775-1720
Pauls Valley
700 W. Grant Ave.
(405) 238-7318
Purcell
430 W. Lincoln St.
(405) 775-8094
Dallas
3800 Maple Ave. Ste. 100
(469) 357-3805
Pharr
401 South Cage
(956) 688-3635
1007 North I Rd.
(956) 688-3655
Weslaco
606 S. Texas Blvd.
(956) 688-3605
1310 N. Texas
(956) 968-5551
Hidalgo
1023 S. Bridge
(956) 688-3665
San Juan
108 E. FM 495
(956) 630-9320
Palmhurst
215 E. Mile 3 Rd.
(956) 688-3675
Sand Springs
3402 State Hwy. 97
(918) 497-2466
Stillwater
1900 N. Perkins Rd.
(405) 372-0889
Owasso
9350 N. Garnett
(918) 497-2833
Norman
1461 24th Ave.
(405) 841-4744
Lindsay
209 E. Cherokee
(405) 756-4494
Bixby
11886 S. Memorial
(918) 497-2855
As used in this report, the words “Company,” “we,” “us,” and “our” refer to International Bancshares
Corporation, a Texas corporation, its five wholly owned subsidiary banks (“Subsidiary Banks”), and other subsidiaries.
The information that follows may contain forward-looking statements, which are qualified as indicated under “Cautionary
Notice Regarding Forward-Looking Statements” in Item 7 (Management’s Discussion and Analysis of Financial
Condition and Results of Operations) of this report. Our website address is www.ibc.com.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
(Consolidated)
The following consolidated selected financial data is derived from our audited financial statements as of and for
the five years ended December 31, 2022. The following consolidated financial data should be read in conjunction with
Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial
Statements and related notes in this report.
SELECTED FINANCIAL DATA
2022
AS OF OR FOR THE YEARS ENDED DECEMBER 31,
2020
(Dollars in Thousands, Except Per Share Amounts)
2019
2021
2018
STATEMENT OF CONDITION
Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,501,476 $ 16,046,236 $ 14,029,467 $ 12,112,894 $ 11,871,952
Investment securities available-
for-sale . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . .
Deposits. . . . . . . . . . . . . . . . . . . . . . . .
Other borrowed funds . . . . . . . . . . . .
Junior subordinated deferrable
interest debentures. . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . .
INCOME STATEMENT
Interest income . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . .
Provision for probable loan losses . .
Non-interest income . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . .
Income before income taxes . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Net income available to common
4,417,796
7,304,631
12,660,007
10,944
4,213,920
7,098,777
12,617,877
436,138
3,080,768
7,432,695
10,721,860
436,327
3,378,923
6,834,668
8,826,034
626,511
3,411,350
6,499,905
8,696,545
705,665
134,642
2,044,759
134,642
2,308,481
134,642
2,177,998
134,642
2,118,053
160,416
1,939,582
$
525,781 $
38,156
487,625
21,651
187,134
270,469
382,639
82,407
300,232
398,103 $
26,831
371,272
7,955
222,326
263,316
322,327
68,405
253,922
427,008 $
39,119
387,889
45,379
150,579
281,331
211,758
44,439
167,319
492,401 $
58,629
433,772
18,843
154,826
309,801
259,954
54,850
205,104
465,822
52,668
413,154
6,112
165,042
299,501
272,583
56,652
215,931
shareholders . . . . . . . . . . . . . . . . . . .
$
300,232 $
253,922 $
167,319 $
205,104 $
215,931
Per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . $
4.79 $
4.78 $
4.01 $
4.00 $
2.63 $
2.62 $
3.13 $
3.12 $
3.27
3.24
1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis represents an explanation of significant changes in our financial position
and results of our operations on a consolidated basis for the three-year period ended December 31, 2022. The following
discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022,
and the Selected Financial Data and Consolidated Financial Statements included elsewhere herein.
Special Cautionary Notice Regarding Forward Looking Information
Certain matters discussed in this report, excluding historical information, include forward-looking statements,
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbor created by these sections. Although we believe such
forward-looking statements are based on reasonable assumptions, no assurance can be given that every objective will be
reached. The words “estimate,” “expect,” “intend,” “believe” and “project,” as well as other words or expressions of a
similar meaning, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date of this report. Such statements are based on current
expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience
may differ materially from the forward-looking statements as a result of many factors.
Risk factors that could cause actual results to differ materially from any results that we project, forecast, estimate
or budget in forward-looking statements include, among others, the following possibilities:
Local, regional, national and international economic business conditions and the impact they may have on
us, our customers, and such customers’ ability to transact profitable business with us, including the ability of
our borrowers to repay their loans according to their terms or a change in the value of the related collateral.
Volatility and disruption in national and international financial markets.
Government intervention in the U.S. financial system.
The unavailability of funding from the FHLB, the Fed or other sources in the future could adversely impact
our growth strategy, prospects and performance.
Changes in consumer spending, borrowing and saving habits.
Changes in interest rates and market prices, including, changes in federal regulations on the payment of
interest on demand deposits.
Changes in the capital markets we utilize, including changes in the interest rate environment that may reduce
margins.
Changes in state and/or federal laws and regulations, including, the impact of the Consumer Financial
Protection Bureau (“CFPB”) as a regulator of financial institutions, changes in the accounting, tax and
regulatory treatment of trust preferred securities, as well as changes in banking, tax, securities, insurance,
employment, environmental and immigration laws and regulations and the risk of litigation that may follow.
Changes in U.S.—Mexico trade, including, reductions in border crossings and commerce, integration and
implementation of the United States-Mexico-Canada Agreement and the possible imposition of tariffs on
imported goods.
The reduction of deposits from nonresident alien individuals due to the IRS rules requiring U.S. financial
institutions to report deposit interest payments made to such individuals.
The loss of senior management or operating personnel.
The timing, impact and other uncertainties of the potential future acquisitions, as well as our ability to
maintain our current branch network and enter new markets to capitalize on growth opportunities.
Changes in estimates of future reserve requirements based upon periodic review thereof under relevant
regulatory and accounting requirements.
2
Additions to our allowance for credit loss as a result of changes in local, national or international conditions
which adversely affect our customers.
Greater than expected costs or difficulties related to the development and integration of new products and
lines of business.
Increased labor costs and effects related to health care reform and other laws, regulations and legal
developments impacting labor costs.
Impairment of carrying value of goodwill could negatively impact our earnings and capital.
Changes in the soundness of other financial institutions with which we interact.
Political instability in the United States or Mexico.
Technological changes or system failures or breaches of our network security, as well as other cyber security
risks, could subject us to increased operating costs, litigation and other liabilities.
Acts of war or terrorism.
Natural disasters or other adverse external events such as pandemics or epidemics.
Reduced earnings resulting from the write down of the carrying value of securities held in our securities
available-for-sale portfolios.
The effect of changes in accounting policies and practices by the Public Company Accounting Oversight
Board, the Financial Accounting Standards Board and other accounting standards setters.
The costs and effects of regulatory developments or regulatory or other governmental inquiries and the results
of regulatory examinations or reviews and obtaining regulatory approvals.
The effect of final rules amending Regulation E that prohibit financial institutions from charging consumer
fees for paying overdrafts on ATM and one-time debit card transactions, as well as the effect of any other
regulatory or legal developments that limit overdraft services.
The reduction of income and possible increase in required capital levels related to the adoption of legislation,
including and the implementing rules and regulations, including those that establish debit card interchange
fee standards and prohibit network exclusivity arrangements and routing restrictions.
The increase in required capital levels related to the implementation of capital and liquidity rules of the
federal banking agencies that address or are impacted by the Basel III capital and liquidity standards.
The enhanced due diligence burden imposed on banks related to the banks’ inability to rely on credit ratings
under Dodd-Frank.
Our failure or circumvention of our internal controls and risk management, policies and procedures.
Forward-looking statements speak only as of the date on which such statements are made. It is not possible to
foresee or identify all such factors. We make no commitment to update any forward-looking statement, or to disclose any
facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement, unless
required by law.
Overview
We are headquartered in Laredo, Texas, with 167 facilities and 257 ATMs, providing banking services for
commercial, consumer and international customers of north, south, central and southeast Texas and the State of Oklahoma.
We are one of the largest independent commercial bank holding companies headquartered in Texas. We, through our
Subsidiary Banks, are in the business of gathering funds from various sources and investing those funds in order to earn a
return. We, either directly or through a Subsidiary Bank, own one insurance agency, a liquidating subsidiary, a fifty percent
interest in an investment banking unit that owns a broker/dealer, a controlling interest in four merchant banking entities,
and a majority ownership in a real-estate development partnership. Our primary earnings come from the spread between
the interest earned on interest-bearing assets and the interest paid on interest-bearing liabilities. In addition, we generate
income from fees on products offered to commercial, consumer and international customers. The sales team of each of our
Subsidiary Banks aims to match the right mix of products and services to each customer to best serve the customer’s needs.
That process entails spending time with customers to assess those needs and servicing the sales arising from those
3
discussions on a long-term basis. Our Subsidiary Banks have various compensation plans, including incentive-based
compensation, for fairly compensating employees. Our Subsidiary Banks also have a robust process in place to review
sales that support the incentive-based compensation plan to monitor the quality of the sales and identify any significant
irregularities, a process that has been in place for many years.
One of our primary goals is to grow net interest income and non-interest income while adequately managing
credit risk, interest rate risk and expenses. Effective management of capital is one of our critical objectives. A key measure
of the performance of a banking institution is the return on average common equity (“ROE”). Our ROE for the year ended
December 31, 2022 was 12.52% as compared to 11.28% for the year ended December 31, 2021.
We are highly active in facilitating trade along the United States border with Mexico. We do a large amount of
business with customers domiciled in Mexico and deposits from persons and entities domiciled in Mexico comprise a large
and stable portion of the deposit base of our Subsidiary Banks. We also serve the growing Hispanic population through
our facilities located throughout north, south, central and southeast Texas and the State of Oklahoma.
Expense control is an essential element of our long-term profitability. It has been a constant focus of ours for
many years and is especially critical during periods of economic uncertainty. As a result, we have achieved a decrease of
approximately 12.7% or $39.3 million, before tax, in non-interest expense over the three-year period ended December 31,
2022, primarily driven by decreases in our employee compensation and benefit plan expenses, professional fees and other
general operating expenses with the ultimate goal of ensuring that we align our workforce and operating expenses with
our revenue streams.
Future economic conditions remain uncertain and the impact of those conditions on our business also remains
uncertain. Our business depends on the willingness and ability of our customers to conduct banking and other financial
transactions. Our revenue streams including service charges on deposits and banking and non-banking service charges and
fees (ATM and interchange income) have been impacted and may continue to be impacted in the future if economic
conditions do not improve. Expense control has been a long-time focus and essential element to our long-term profitability.
We have kept that focus in mind as we continue to look at operations and create efficiencies and institute cost-control
protocols at all levels. We will continue to monitor our efficiency ratio, a measure of non-interest expense to net interest
income plus non-interest income and our overhead burden ratio, a ratio of our operating expenses against total assets,
closely. We use these measures in determining if we are accomplishing our long-term goals of controlling our costs in
order to provide superior returns to our shareholders.
Results of Operations
Summary
Consolidated Statements of Condition Information
December 31, 2022
December 31, 2021
Percent Increase (Decrease)
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase agreements . . . .
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated deferrable interest
debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
$
15,501,476 $
7,304,631
12,660,007
431,191
10,944
(Dollars in Thousands)
16,046,236
7,098,777
12,617,877
439,672
436,138
134,642
2,044,759
134,642
2,308,481
(3.4)%
2.9
0.3
(1.9)
(97.5)
—
(11.4)
4
Consolidated Statements of Income Information
Year Ended
December 31,
2022
Interest income . . . . . . . . . . . . . . . . . . . . . . . $ 525,781 $ 398,103
26,831
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
371,272
Net interest income . . . . . . . . . . . . . . . . . . . .
7,955
Provision for probable loan losses . . . . . . . .
222,326
Non-interest income . . . . . . . . . . . . . . . . . . .
263,316
Non-interest expense. . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . .
253,922
Per common share:
38,156
487,625
21,651
187,134
270,469
300,232
Year Ended
December 31,
2020
Year Ended
December 31,
2021
Percent
Increase
(Decrease)
2022 vs. 2021
(Dollars in Thousands, Except Per Share Amounts)
427,008
39,119
387,889
45,379
150,579
281,331
167,319
32.1 % $
42.2
31.3
172.2
(15.8)
2.7
18.2
Percent
Increase
(Decrease)
2021 vs. 2020
(6.8)%
(31.4)
(4.3)
(82.5)
47.6
(6.4)
51.8
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.79 $
4.78
4.01
4.00
19.5 % $
19.5
2.63
2.62
52.5 %
52.7
Net Income
Net income for the year ended December 31, 2022 increased by 18.2% compared to the same period of 2021. Net
income was positively impacted by an increase in net interest income and is primarily attributable to an increase in the size
of our investment portfolio, the interest earned on funds held at the Federal Reserve Bank, and an increase in loan interest
income, of which the latter two have increased in line with Federal Reserve Board actions to raise interest rates in 2022.
The increase in those revenue streams coupled with the cost control initiatives to streamline operations and increase
efficiency in recent years have been the primary drivers in achieving these results. Non-interest income for the year ended
December 31, 2022 was also positively impacted by gains on the sale of some properties from our branch network as we
continue to monitor and evaluate our retail branch footprint and align the footprint with customer activity. Net income for
the year ended December 31, 2021 increased by 51.8% compared to the same period of 2020. Net income for 2021 was
positively impacted by the sale of an equity interest in a merchant banking investment held by one of our non-bank
subsidiaries totaling $42.8 million, net of tax, in the second quarter of 2021. Net income for 2021 was also positively
impacted by a decrease in the provision for credit losses compared to the same period of 2020. We adopted the provisions
of Accounting Standards Update No. 2016-13, “Financial Instruments – Credit Losses: (“ASU 2016-13”) on January 1,
2020, resulting in a transition from the long-standing incurred loss model to an expected credit loss model, which
recognizes credit losses over the life of a financial asset. Expected credit losses capture historical information, current
conditions, and reasonable and supportable forecasts of future conditions. The impact of the adoption resulted in a one-
time charge to capital of $8.3 million, net of tax. The credit loss expense charged to operations increased throughout 2020
as a result of increases in the allowance for credit losses (“ACL”) due to deteriorating economic conditions as a result of
COVID-19 and the impact of those conditions on certain segments of our loan portfolio. Economic conditions during 2021
stabilized or improved in certain segments.
Net Interest Income
Net interest income is the spread between income on interest-earning assets, such as loans and securities, and the
interest expense on liabilities used to fund those assets, such as deposits, repurchase agreements and funds borrowed. Net
interest income is our largest source of revenue. Net interest income is affected by both changes in the level of interest
5
rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Tax-exempt
yields have not been adjusted to a tax-equivalent basis.
For the years ended December 31,
2021
Average
Rate/Cost
2020
Average
Rate/Cost
2022
Average
Rate/Cost
Assets
Interest earning assets:
Loan, net of unearned discounts:
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.69 %
3.49
1.66
3.60
1.63
3.62 %
4.85 %
3.31
0.95
3.38
0.13
2.94 %
5.12 %
3.73
1.43
3.61
0.12
3.72 %
Liabilities
Interest bearing liabilities:
Savings and interest-bearing demand deposits. . . . . . . . . . . . . . . . .
Time deposits:
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase agreements . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated deferrable interest debentures . . . . . . . . . . . . .
Total interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
0.27 %
0.10 %
0.18 %
0.64
0.40
0.52
1.75
3.74
0.49 %
0.71
0.37
0.15
1.75
2.07
0.36 %
1.06
0.81
0.28
1.60
2.85
0.59 %
The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net
income and net interest margin. The yield on average interest-earning assets increased 23.1% from 2.94% in 2021 to 3.62%
in 2022, and the rates paid on average interest-bearing liabilities increased 36.1% from 0.36% in 2021 to 0.49% in 2022.
The yield on average interest-earning assets decreased 21.0% from 3.72% in 2020 to 2.94% in 2021, and the rates paid on
average interest-bearing liabilities decreased 39.0% from .59% in 2020 to .36% in 2021.
6
The following table analyzes the changes in net interest income during 2022, 2021 and 2020 and the relative
effect of changes in interest rates and volumes for each major classification of interest-earning assets and interest-bearing
liabilities. Non-accrual loans have been included in assets for the purpose of this analysis, which reduces the resulting
yields:
2022 compared to 2021
Net increase (decrease) due to
Rate(1)
(Dollars in Thousands)
Total
Volume(1)
2021 compared to 2020
Net increase (decrease) due to
Rate(1)
(Dollars in Thousands)
Total
Volume(1)
Interest earned on:
Loans, net of unearned discounts:
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (16,540)
488
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
58,771 $ 42,231 $ 1,459 $ (19,237) $ (17,778)
(586)
(522)
(64)
243
731
(11,764)
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(951)
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,174
Total interest income . . . . . . . . . . . . . . . . . . $ (6,285) $ 133,963 $ 127,678 $ 8,425 $ (37,330) $ (28,905)
(17,673)
(101)
203
32,272
155
42,522
40,657
1,058
43,001
5,909
(850)
1,971
8,385
903
479
Interest incurred on:
Savings and interest-bearing demand
deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . $
353
8,223 $ 8,576 $ 1,367 $ (3,615) $ (2,248)
Time deposits:
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . .
Junior subordinated deferrable interest
(404)
205
98
(865)
(677)
378
(1,081)
583
784
121
(3,756)
(4,724)
(2,972)
(4,603)
1,776
(8)
1,874
(873)
210
(1,780)
(515)
661
(305)
(1,119)
debentures . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense. . . . . . . . . . . . . . . . . . $
(1,041)
702 $ (12,990) $ (12,288)
Net interest income . . . . . . . . . . . . . . . . . . . . . . $ (5,672) $ 122,025 $ 116,353 $ 7,723 $ (24,340) $ (16,617)
(613) $ 11,938 $ 11,325 $
(1,041)
2,246
2,246
—
—
(1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
The increase in net interest income for the year ended December 31, 2022 can be primarily attributable to an
increase in the size of our investment portfolio, the interest earned on funds held at the Federal Reserve Bank, and an
increase in loan interest income, of which the latter two have increased in line with Federal Reserve Board actions to raise
interest rates in 2022. The overall size of our loan portfolio has decreased due to slow loan demand, thus reducing the
benefit of the rate changes to only the floating rate loans in our portfolio. As part of our strategy to manage interest rate
risk, we strive to manage both assets and liabilities so that interest sensitivities match. One method of calculating interest
rate sensitivity is through gap analysis. A gap is the difference between the amount of interest rate sensitive assets and
interest rate sensitive liabilities that re-price or mature in a given time period. Positive gaps occur when interest rate
sensitive assets exceed interest rate sensitive liabilities, and negative gaps occur when interest rate sensitive liabilities
exceed interest rate sensitive assets. A positive gap position in a period of rising interest rates should have a positive effect
on net interest income as assets will re-price faster than liabilities. Conversely, net interest income should contract
somewhat in a period of falling interest rates. Our management can quickly change our interest rate position at any given
point in time as market conditions dictate. Additionally, interest rate changes do not affect all categories of assets and
liabilities equally or at the same time. Analytical techniques we employ to supplement gap analysis include simulation
analysis to quantify interest rate risk exposure. The gap analysis prepared by management is reviewed by our Investment
Committee at least twice a year. The Investment Committee is comprised of certain members of the board of directors and
senior managers of the various Subsidiary Banks. Management currently believes that we are properly positioned for
interest rate changes; however, if management determines at any time that we are not properly positioned, we will strive
to adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes.
7
Allowance for Credit Losses
The ACL increased 14.1% to $125,972,000 at December 31, 2022 from $110,374,000 at December 31, 2021.
The provision for credit losses charged to expense increased $13,696,000 to $21,651,000 for the year ended December 31,
2022 from $7,955,000 for the same period in 2021.
The following table summarizes loan balances at the end of each year and average loans outstanding during the
year and the following ratios: nonaccrual loans to total loans, nonaccrual loans to the ACL, charge-offs to average loans,
by loan type, and total charge-off to average total loans:
2022
2021
2020
(Dollars in Thousands)
Allowance for credit losses to total loans outstanding . . . . . . . . . . . . . . .
1.70 %
1.53 %
1.47 %
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,972
Loans, net of unearned discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,430,603
$ 110,374
$ 7,209,151
$ 109,059
$ 7,415,464
Nonaccrual loans to total loans outstanding . . . . . . . . . . . . . . . . . . . . . . .
0.70 %
0.03 %
0.27 %
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
51,648
Loans, net of unearned discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,430,603
$
1,921
$ 7,209,151
$
19,822
$ 7,415,464
Allowance for credit losses to nonaccrual loans . . . . . . . . . . . . . . . . . . . .
243.90 %
5,745.65 %
550.19 %
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,972
51,648
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$ 110,374
1,921
$
$ 109,059
19,822
$
Net charge-offs during the period to average loans outstanding:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.61 %
0.48 %
0.53 %
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,050
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,472,338
$
8,083
$ 1,669,233
$
8,936
$ 1,680,502
Commercial real estate: other construction and land development . . . .
— %
2
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,210
— %
2
$
$ 1,700,220
— %
19
$
$ 2,186,779
Commercial real estate: farmland and commercial . . . . . . . . . . . . . . . . .
— %
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
16
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,541,380
0.01 %
$
364
$ 2,573,151
— %
$
55
$ 2,010,666
Commercial real estate: multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— %
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 252,685
— %
$
—
$ 401,551
— %
$
—
$ 277,416
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.04 %
160
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 448,816
0.09 %
373
$
$ 433,262
0.04 %
160
$
$ 433,586
Residential: junior lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.01 %
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420,062
— %
$
25
$ 501,451
0.02 %
$
124
$ 658,723
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.55 %
223
40,399
$
$
0.44 %
176
39,890
$
$
0.66 %
280
42,558
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— %
—
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,262
— %
1
$
$ 123,524
— %
—
$
$ 125,234
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.13 %
0.12 %
0.13 %
Net charge-offs during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,479
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,116,152
$
9,024
$ 7,442,282
$
9,574
$ 7,415,464
(1) The average balances for purposes of the above table are calculated on the basis of daily balances.
8
The ACL has been allocated based on the amount management has deemed to be reasonably necessary to provide
for the credit losses incurred within the following categories of loans at the dates indicated and the percentage of loans to
total loans in each category:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: other construction
2022
At December 31,
2021
2020
Allowance
Percent
of total
Allowance
Percent
of total
Allowance
Percent
of total
$ 26,728
20.2 % $
(Dollars in Thousands)
23,178
20.8 % $
21,908
23.7 %
and land development. . . . . . . . . . . . . . . . .
44,684
26.7
35,390
23.1
37,612
24.5
Commercial real estate: farmland &
commercial . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . .
Residential : first lien. . . . . . . . . . . . . . . . . . .
Residential: junior lien. . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,474
3,794
4,759
8,284
281
968
$ 125,972
34.6
4.1
5.7
5.9
0.6
2.2
35,654
3,291
4,073
7,754
272
762
100.0 % $ 110,374
37.6
4.0
5.6
6.4
0.6
1.9
30,000
5,051
3,874
9,570
291
753
100.0 % $ 109,059
30.4
5.8
5.4
7.9
0.5
1.8
100.0 %
The ACL primarily consists of the aggregate ACL’s of the Subsidiary Banks. The ACL’s are established through
charges to operations in the form of provisions for credit losses.
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well
as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial, financial and agricultural
or real estate loans are generally considered by management to represent a loss, in whole or part, (i) when an exposure
beyond any collateral coverage is apparent, (ii) when no further collection of the portion of the loan so exposed is
anticipated based on actual results, (iii) when the credit enhancements, if any, are not adequate, and (iv) when the
borrower’s financial condition would so indicate. Generally, unsecured consumer loans are charged-off when 90 days past
due.
The ACL is a reserve established through a provision for credit losses charged to expense, which represents
management’s best estimate of credit losses within the existing portfolio of loans based on our internal ACL calculation.
While our management considers that it is generally able to identify borrowers with financial problems reasonably early
and to monitor credit extended to such borrowers carefully, there is no precise method of predicting credit losses. The
determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an
exercise of judgment. Similarly, the determination of the adequacy of the ACL can be made only on a subjective basis.
Our management believes that the ACL at December 31, 2022 was adequate to absorb expected losses from loans and
other financial instruments in the portfolio at that date. See Critical Accounting Policies on page 19.
9
Non-Interest Income
Year Ended Year Ended
December 31, December 31,
2022
2021
Percent
Increase
(Decrease)
2022 vs. 2021
(Dollars in Thousands)
Year Ended
December 31,
2020
Percent
Increase
(Decrease)
2021 vs. 2020
Service charges on deposit accounts . . . . . . . . . . . $ 72,781 $ 66,205
Other service charges, commissions and fees
Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities transactions, net. . . . . . . . . .
Other investments, net. . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54,280
8,007
(16)
68,807
25,043
Total non-interest income . . . . . . . . . . . . . . . . . $ 187,134 $ 222,326
55,253
8,568
—
17,538
32,994
9.9 % $ 61,983
6.8 %
48,986
1.8
7,822
7.0
(5)
(100.0)
4,920
(74.5)
31.7
26,873
(15.8)% $ 150,579
10.8
2.4
220.0
1,298.5
(6.8)
47.6 %
Total non-interest income for the year ended December 31, 2022 decreased by 15.8% compared to 2021. Non-
interest income was positively impacted due to an increase in service charges on deposit accounts as customer activity
continues to increase from previously depressed levels resulting from the COVID-19 pandemic. Other income was
positively impacted by gains on the sale of some properties from our branch network as we continue to monitor and
evaluate our retail branch footprint and align the footprint with customer activity. The decrease in other investment income
for the year ended December 31, 2022 compared to the same period of 2021 is primarily attributable to the sale of an
equity interest in a merchant banking investment held by one of our non-bank subsidiaries in the second quarter of 2021.
Total non-interest income for the year ended December 31, 2021 increased by 47.6% compared to the same period of
2020. Income from service charges on deposits increased for the year ended December 31, 2021 compared to the same
period of 2020 due to an increase in customer activity as a result of the current economic environment and a decrease in
the impact of the COVID-19 pandemic on day-to day activities. Non-interest income from other investments for the year
ended December 31, 2021 was positively impacted by the sale of an equity interest in a merchant banking investment held
by one of our non-bank subsidiaries.
Non-Interest Expense
Year Ended Year Ended
December 31, December 31,
2022
2021
Percent
Increase
(Decrease)
2022 vs. 2021
(Dollars in Thousands)
Year Ended
December 31,
2020
Percent
Increase
(Decrease)
2021 vs. 2020
Employee compensation and benefits . . . . . . . . . . . $ 127,722 $ 123,480
26,176
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,028
Depreciation of bank premises and equipment . . . .
7,890
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,389
Deposit insurance assessments . . . . . . . . . . . . . . . . .
5,073
Net expense, other real estate owned . . . . . . . . . . . .
4,037
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,794
Software and software maintenance. . . . . . . . . . . . .
49,449
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expense. . . . . . . . . . . . . . . . . . $ 270,469 $ 263,316
25,654
21,821
11,292
6,987
122
4,588
15,271
57,012
3.4 % $ 130,039
24,909
(2.0)
28,318
(12.8)
12,546
43.1
1,870
59.2
9,808
(97.6)
13.6
4,284
19,238
(14.2)
50,319
53.4
2.7 % $ 281,331
(5.0)%
5.1
(11.6)
(37.1)
134.7
(48.3)
(5.8)
(7.5)
(1.7)
(6.4)%
Non-interest expense for the year ended December 31, 2022 increased by 2.7% compared to the same period of
2021. The increase is primarily attributable to an increase in our employee compensation and benefits costs as we continue
to review and adjust our compensation and benefits programs to recognize performance and retain our workforce. We
continue to monitor and manage our controllable non-interest expenses through a variety of measures with the ultimate
goal of ensuring we align non-interest expenses with our operations and revenue streams. The expense reductions occurred
because management acted quickly and precisely at the onset of the pandemic to mitigate the impact of reduced interest
rates and business activities and have remained in place over the last two years. Although certain controllable expenses
10
have increased, the overall strategy of controlling expenses remains in place. Non-interest expense for the year ended
December 31, 2021 decreased by 6.4% compared to the same period of 2020. The decrease is primarily due to our
continued employee compensation and benefits expense reductions and is primarily being driven by efforts to right-size
and closely manage our workforce commensurate with decreased activities in our branches while ensuring that we are able
to continue to serve our customers.
Effects of Inflation
The principal component of earnings is net interest income, which is affected by changes in the level of interest
rates. Changes in rates of inflation affect interest rates. It is difficult to precisely measure the impact of inflation on net
interest income because it is not possible to accurately differentiate between increases in net interest income resulting from
inflation and increases resulting from increased business activity. Inflation also raises costs of operations, primarily those
of employment and services.
Financial Condition
Investment Securities
The following tables set forth the average yield, by contractual maturities of debt investment securities, at
December 31, 2022, except for the totals, which reflect the weighted average yields. Actual maturities will differ from
contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
Within one
year
Adjusted
Yield
Available for Sale Maturing
After one but
within five years
Adjusted
Yield
After five but
within ten years
Adjusted
Yield
(Dollars in Thousands)
After ten years
Adjusted
Yield
U.S. Treasury Securities . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.31 %
2.06
—
1.35 %
— %
2.79
—
2.79 %
— %
2.34
—
2.34 %
— %
2.23
4.13
2.29 %
Within one
year
Adjusted
Yield
Held to Maturity Maturing
After one but
within five years
Adjusted
Yield
After five but
within ten years
Adjusted
Yield
(Dollars in Thousands)
After ten years
Adjusted
Yield
Other securities . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.65 %
1.65 %
0.62 %
0.62 %
— %
— %
— %
— %
Residential mortgage-backed securities are securities primarily issued by the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), and the Government National
Mortgage Association (“Ginnie Mae”). Investments in residential mortgage-backed securities issued by Ginnie Mae are
fully guaranteed by the U.S. government. Investments in residential mortgage-backed securities issued by Freddie Mac
and Fannie Mae are not fully guaranteed by the U.S. government; however, we believe that the quality of the bonds is
similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie
Mac into conservatorship by the federal government in 2008 and because securities issued by others that are collateralized
by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated
securities.
11
Loans
The following table shows the amounts of loans outstanding as of December 31, 2022, which based on remaining
scheduled repayments of principal are due in the years indicated. Also, the amounts due after one year are classified
according to the sensitivity to changes in interest rates:
Within one
year
After one but
within five
years
Maturing
After five but
within fifteen After fifteen
years
years
Total
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . $ 613,000
Commercial real estate: other
$
(Dollars in Thousands)
$ 247,416 $
637,945
393
$ 1,498,754
construction & land development . . . . . . .
678,842
1,210,240
100,307
280
1,989,669
Commercial real estate: farmland &
commercial . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . .
Residential: junior lien. . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
634,481
147,633
26,500
6,200
28,385
85,816
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,220,857
1,721,371
153,329
110,053
27,589
12,937
48,343
$ 3,921,807
212,154
4,564
60,799
321,410
233
7,839
112
975
228,372
85,071
37
17,977
$ 954,722 $ 333,217
2,568,118
306,501
425,724
440,270
41,592
159,975
$ 7,430,603
Amount due after one year:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: other construction & land development . . . . . . . . . . . . . .
Commercial real estate: farmland & commercial . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential: junior lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
International Operations
Interest sensitivity
Fixed Rate
Variable Rate
(Dollars in Thousands)
194,052
29,476
41,754
2,032
232,545
411,293
13,207
21,424
945,783
$
$
691,702
1,281,351
1,891,883
156,836
166,679
22,777
—
52,735
4,263,963
On December 31, 2022, we had $159,975,000 (1.0% of total assets) in loans outstanding to borrowers domiciled
in foreign countries, which included primarily borrowers domiciled in Mexico. The loan policies of our Subsidiary Banks
generally require that loans to borrowers domiciled in foreign countries be primarily secured by assets located in the United
12
States or have credit enhancements in the form of guarantees from significant United States corporations. The composition
of such loans as of December 31, 2022 and 2021 is presented below.
Secured by certificates of deposit in United States banks . . . . . . . . . . . . . . . . . . . $
Secured by United States real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured by other United States collateral (securities, gold, silver, etc.) . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (principally Mexico real estate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Deposits
For the year ended December 31,
2022
Amount of
Loans
2021
Amount of
Loans
(Dollars in Thousands)
90,887 $
36,048
6,125
21,108
5,807
159,975
$
85,532
29,436
5,676
10,224
3,929
134,797
The following table illustrates the average amounts of deposits for the twelve months ended December 31, 2022
and December 31, 2021. Included in the table is our estimate of the amount of total uninsured deposits as of December 31,
2022 and December 31, 2021.
2022
Average Balance
2021
Average Balance
(Dollars in Thousands)
Deposits:
Demand—non-interest bearing
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total demand non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings and interest-bearing demand
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total savings and interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time certificates of deposit
$ 4,831,516
1,141,946
5,973,462
$
3,510,099
1,156,949
4,667,048
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total time, certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,020,388
1,139,209
2,159,597
$ 12,800,107
Uninsured Deposits: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,718,606
$
$
4,370,929
984,175
5,355,104
3,315,831
981,730
4,297,561
1,077,371
1,083,866
2,161,237
11,813,902
4,904,469
Scheduled maturities of time deposits in amounts of $250,000 or more at December 31, 2022 and an estimate of
uninsured time deposits, were as follows (Dollars in Thousands):
Due within 3 months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after 3 months and within 6 months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 6 months and within 12 months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
432,478
208,930
262,882
62,666
966,956
Portion of time deposits that are uninsured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
585,456
We offer a variety of deposit accounts having a wide range of interest rates and terms. We rely primarily on our
high-quality customer service, sales programs, customer referrals and advertising to attract and retain these deposits.
13
Deposits provide the primary source of funding for our lending and investment activities, and the interest paid for deposits
must be managed carefully to control the level of interest expense. Deposits at December 31, 2022 were $12,660,007,000,
an increase of .3% from $12,617,877,000 at December 31, 2021.
Other Borrowed Funds
Other borrowed funds include FHLB borrowings which are long-term borrowings issued by the FHLB of Dallas
and the FHLB of Topeka at the market price offered at the time of funding. These borrowings are secured by residential
mortgage-backed investment securities and a portion of our loan portfolio. At December 31, 2022, other borrowed funds
totaled $10,944,000, a decrease of 97.5% from $436,138,000 at December 31, 2021. Other borrowed funds included non-
amortizing callable advances with the FHLB of Dallas. The non-amortizing callable advances were called in the fourth
quarter of 2022.
Return on Equity and Assets
Certain key ratios for the years ended December 31, 2022, 2021 and 2020 follow (1):
Years ended
December 31,
2021
2022
Percentage of net income to:
Average shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of average shareholders’ equity to average total assets. . . .
Percentage of cash dividends per share to net income per share . . . . . .
12.52 %
1.83
14.63
24.84
11.28 %
1.68
14.88
28.70
(1) The average balances for purposes of the above table are calculated on the basis of daily balances.
2020
7.86 %
1.27
16.20
41.60
Liquidity and Capital Resources
Liquidity
The maintenance of adequate liquidity provides our Subsidiary Banks with the ability to meet potential depositor
withdrawals, provide for customer credit needs, maintain adequate statutory reserve levels and take full advantage of
high-yield investment opportunities as they arise. Liquidity is afforded by access to financial markets and by holding
appropriate amounts of liquid assets. Our Subsidiary Banks derive their liquidity largely from deposits of individuals and
business entities. Other important funding sources for our Subsidiary Banks during 2022 and 2021 were borrowings from
the FHLB, securities sold under repurchase agreements and large certificates of deposit, requiring management to closely
monitor its asset/liability mix in terms of both rate sensitivity and maturity distribution. Our Subsidiary Banks have had a
long-standing relationship with the FHLB and keep open, unused, lines of credit in order to fund liquidity needs. In the
event that the FHLB indebtedness is not renewed, the repayment of the outstanding indebtedness would more than likely
be repaid through proceeds generated from the sales of unpledged available-for-sale securities. We maintain a sizable,
high quality investment portfolio to provide significant liquidity. These securities can be sold or sold under agreements to
repurchase, to provide immediate liquidity. As in the past, we will continue to monitor the volatility and cost of funds in
an attempt to match maturities of rate-sensitive assets and liabilities and respond accordingly to anticipated fluctuations in
interest rates over reasonable periods of time.
Asset/Liability Management
Our funds management policy has as its primary focus the measurement and management of the Subsidiary
Banks’ earnings at risk in the face of rising or falling interest rate forecasts. The earliest and most simplistic concept of
earnings at risk measurement is the gap report, which is used to generate a rough estimate of the vulnerability of net interest
income to changes in market rates as implied by the relative re-pricings of assets and liabilities. The gap report calculates
14
the difference between the amounts of assets and liabilities re-pricing across a series of intervals in time, with emphasis
typically placed on the one-year period. This difference, or gap, is usually expressed as a percentage of total assets.
If an excess of liabilities over assets matures or re-prices within the one-year period, the statement of condition
is said to be negatively gapped. This condition is sometimes interpreted to suggest that an institution is liability-sensitive,
indicating that earnings would suffer from rising rates and benefit from falling rates. If a surplus of assets over liabilities
occurs in the one-year time frame, the statement of condition is said to be positively gapped, suggesting a condition of
asset sensitivity in which earnings would benefit from rising rates and suffer from falling rates.
The gap report thus consists of an inventory of dollar amounts of assets and liabilities that have the potential to
mature or re-price within a particular period. The flaw in drawing conclusions about interest rate risk from the gap report
is that it takes no account of the probability that potential maturities or re-pricings of interest-rate-sensitive accounts will
occur, or at what relative magnitudes. Because simplicity, rather than utility, is the only virtue of gap analysis, financial
institutions increasingly have either abandoned gap analysis or accorded it a distinctly secondary role in managing their
interest-rate risk exposure.
The net interest rate sensitivity at December 31, 2022, is illustrated in the following table. This information
reflects the balances of assets and liabilities whose rates are subject to change. As indicated in the table below, we are
asset sensitive through all of the time periods illustrated. The table shows the sensitivity of the statement of condition at
one point in time and is not necessarily indicative of the position at future dates.
15
INTEREST RATE SENSITIVITY
(Dollars in Thousands)
December 31, 2022
3 Months
or Less
Over 3
Months to
1 Year
Rate/Maturity
Over 1
Year to 5
Years
(Dollars in Thousands)
Over 5
Years
Total
Rate sensitive assets
Investment securities. . . . . . . . . . . . . . . . . $ 221,770
6,166,241
Loans, net of non-accruals . . . . . . . . . . . .
$ 717,461
254,582
$ 3,328,172
143,978
$
159,151
814,154
$ 4,426,554
7,378,955
Total earning assets . . . . . . . . . . . . . . . . . . $ 6,388,011
$ 972,043
$ 3,472,150
$
973,305
$ 11,805,509
Cumulative earning assets . . . . . . . . . . . . $ 6,388,011
$ 7,360,054
$ 10,832,204
$ 11,805,509
Rate sensitive liabilities
Time deposits. . . . . . . . . . . . . . . . . . . . . . . $ 947,200
Other interest-bearing deposits. . . . . . . . .
4,745,768
Securities sold under repurchase
$ 974,983
—
$
145,994
—
$
7
—
$ 2,068,184
4,745,768
agreements . . . . . . . . . . . . . . . . . . . . . . .
Other borrowed funds . . . . . . . . . . . . . . . .
Junior subordinated deferrable
419,703
—
11,488
—
interest debentures . . . . . . . . . . . . . . . . .
134,642
—
—
—
—
—
10,944
431,191
10,944
—
134,642
Total interest-bearing liabilities . . . . . . . . $ 6,247,313
$ 986,471
$
145,994
$
10,951
$ 7,390,729
Cumulative sensitive liabilities. . . . . . . . . $ 6,247,313
$ 7,233,784
$ 7,379,778
$ 7,390,729
Repricing gap . . . . . . . . . . . . . . . . . . . . . . . $ 140,698
140,698
Cumulative repricing gap . . . . . . . . . . . . .
Ratio of interest-sensitive assets to
liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio of cumulative, interest-sensitive
assets to liabilities . . . . . . . . . . . . . . . . . .
1.02
1.02
$
(14,428) $ 3,326,156
3,452,426
126,270
$
962,354
4,414,780
$ 4,414,780
0.99
1.02
23.78
88.88
1.60
1.47
1.60
The detailed inventory of statement of condition items contained in gap reports is the starting point of income
simulation analysis. Income simulation analysis also focuses on the variability of net interest income and net income, but
without the limitations of gap analysis. In particular, the fundamental, but often unstated, assumption of the gap approach
that every statement of condition item that can re-price will do so to the full extent of any movement in market interest
rates is taken into consideration in income simulation analysis.
Accordingly, income simulation analysis captures not only the potential of assets and liabilities to mature or
re-price, but also the probability that they will do so. Moreover, income simulation analysis focuses on the relative
sensitivities of these balance sheet items and projects their behavior over an extended period of time in a motion picture
rather than snapshot fashion. Finally, income simulation analysis permits management to assess the probable effects on
balance sheet items not only of changes in market interest rates, but also of proposed strategies for responding to such
changes. We and many other institutions rely primarily upon income simulation analysis in measuring and managing
exposure to interest rate risk.
We have established guidelines for acceptable volatility of projected net interest income on the income simulation
analysis and the guidelines are reviewed at least annually. As of December 31, 2022, in decreasing rate scenarios
of -100, -200 and -300 basis points and in rising rate scenarios of +100, +200 and +300 basis points, the guidelines
16
established by management require that the net interest income not vary by more than minus 20%, 25%, 30%, and 35%,
respectively, for the first 12-month period projected. At December 31, 2022, the most recent income simulations show that
a rate shift of -100, -200, -300, +100, +200, and +300 basis points in interest rates up will vary projected net interest
income for the coming 12-month period by -5.11%, -19.15%, -31.19%, +11.6%, +23.35%, and +35.3%, respectively. The
basis point shift in interest rates is a hypothetical rate scenario used to calibrate risk and does not necessarily represent
management’s current view of future market developments. We believe that we are properly positioned for a potential
interest rate increase or decrease.
All the measurements of risk described above are made based upon our business mix and interest rate exposures
at the particular point in time. The exposure changes continuously as a result of our ongoing business and our risk
management initiatives. While management believes these measures provide a meaningful representation of our interest
rate sensitivity, they do not necessarily take into account all business developments that have an effect on net income, such
as changes in credit quality or the size and composition of the statement of condition.
Our principal sources of liquidity and funding dividends from subsidiaries and borrowed funds, with such funds
being used to finance our cash flow requirements. We closely monitor the dividend restrictions and availability from our
Subsidiary Banks as disclosed in Note 20 to the Consolidated Financial Statements. At December 31, 2022, the aggregate
amount legally available to be distributed to us from our Subsidiary Banks as dividends was approximately $961,000,000,
assuming that each Subsidiary Bank continues to be classified as “well-capitalized” under the applicable regulations in
effect at December 31, 2022. The restricted capital (capital and surplus) of our Subsidiary Banks was approximately
$1,299,530,000 as of December 31, 2022. The undivided profits of our Subsidiary Banks were approximately
$1,469,147,000 as of December 31, 2022.
At December 31, 2022, we had outstanding $10,944,000 in other borrowed funds and $134,642,000 in junior
subordinated deferrable interest debentures. In addition to borrowed funds and dividends, we have a number of other
available alternatives to finance the growth of our Subsidiary Banks as well as future growth and expansion.
Capital
We maintain an adequate level of capital as a margin of safety for our depositors and shareholders. At
December 31, 2022, shareholders’ equity was $2,044,759,000 compared to $2,308,481,000 at December 31, 2021, a
decrease of $263,722,000, or 11.4%. Shareholders’ equity decreased primarily due to an increase in accumulated other
comprehensive loss as a result of market interest conditions and the impact of those conditions on the value of our
investment portfolio. The accumulated other comprehensive loss is not included in the calculation of regulatory capital
ratios.
During 1990, the FRB adopted a minimum leverage ratio of 3% for the most highly rated bank holding companies
and at least 4% to 5% for all other bank holding companies. Our leverage ratio (defined as shareholders’ equity plus
eligible trust preferred securities issued and outstanding less goodwill and certain other intangibles divided by average
quarterly assets) was 14.59% at December 31, 2022 and 13.94% at December 31, 2021. The core deposit intangibles and
goodwill of $282,532,000 as of December 31, 2022, are deducted from the sum of core capital elements when determining
our capital ratios.
The FRB has adopted risk-based capital guidelines which assign risk weightings to assets and off-balance sheet
items. The guidelines also define and set minimum capital requirements (risk-based capital ratios). Under the final 1992
rules, all banks are required to have Tier 1 capital of at least 4.0% of risk-weighted assets and total capital of 8.0% of
risk-weighted assets. Tier 1 capital consists principally of shareholders’ equity plus trust preferred securities issued and
outstanding less goodwill and certain other intangibles, while total capital consists of Tier 1 capital, certain debt
instruments and a portion of the reserve for loan losses. In order to be deemed well-capitalized pursuant to the regulations,
an institution must have a total risk-weighted capital ratio of 10%, a Tier 1 risk-weighted ratio of 8% and a Tier 1 leverage
ratio of 5%. We had risk-weighted Tier 1 capital ratios of 21.04% and 21.59% and risk weighted total capital ratios of
22.22% and 22.73% as of December 31, 2022 and 2021, respectively, which are well above the minimum regulatory
requirements and exceed the well-capitalized ratios (see Note 19 to Notes to Consolidated Financial Statements).
17
In July 2013, the Federal Deposit Insurance Corporation (“FDIC”) and other regulatory bodies established a new,
comprehensive capital framework for U.S. banking organizations, consisting of minimum requirements that increase both
the quantity and quality of capital held by banking organizations. The final rules are a result of the implementation of the
BASEL III capital reforms and various Dodd-Frank related capital provisions. Consistent with the Basel international
framework, the rules include a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5% and a
CET1 capital conservation buffer of 2.5% of risk-weighted assets. The capital conservation buffer began phasing-in on
January 1, 2016 at .625% and increased each year until January 1, 2019, when we were required to have a 2.5% capital
conservation buffer, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon
full implementation. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and
include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize
CET1 capital and implements strict eligibility criteria for regulatory capital instruments. The rules also improve the
methodology for calculating risk-weighted assets to enhance risk sensitivity. The rules were subject to a four-year phase
in period for mandatory compliance and we were required to begin to phase in the rules beginning on January 1, 2015. We
believe that as of December 31, 2022, we meet all fully phased-in capital adequacy requirements.
On November 21, 2017, the OCC, the Federal Reserve and the FDIC finalized a proposed rule that extends the
current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain
minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches
capital rules. Effective January 1, 2018, the rule also pauses the full transition to the Basel III treatment of mortgage
servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority
interests. The agencies are also considering whether to make adjustments to the capital rules in response to CECL (the
FASB Standard relating to current expected credit loss) and its potential impact on regulatory capital.
On December 7, 2017, the Basel Committee on Banking Supervision unveiled the latest round of its regulatory
capital framework, commonly called “Basel IV.” The framework makes changes to the capital framework first introduced
as “Basel III” in 2010. The committee targeted 2022-2027 as the timeframe for implementation by regulators in individual
countries, including the U.S. federal bank regulatory agencies (after notice and comment).
Junior Subordinated Deferrable Interest Debentures
We have formed five statutory business trusts under the laws of the State of Delaware, for the purpose of issuing
trust preferred securities. These statutory business trusts (the “Trusts”) have each issued Capital and Common Securities
and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) that we
issued. As of December 31, 2022 and December 31, 2021, the principal amount of debentures outstanding totaled
$134,642,000.
The Debentures are subordinated and junior in right of payment to all of our present and future senior indebtedness
(as defined in the respective indentures) and are pari passu with one another. The interest rate payable on, and the payment
terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and
Common Securities issued by the Trusts. We have fully and unconditionally guaranteed the obligations of each of the
Trusts with respect to the Capital and Common Securities. We have the right, unless an Event of Default (as defined in the
Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to twenty consecutive
quarterly periods on Trusts VIII, IX, X, XI and XII. If interest payments on any of the Debentures are deferred, distributions
on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to
maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.
For financial reporting purposes, the Trusts are treated as investments and not consolidated in the consolidated
financial statements. Although the Capital Securities issued by each of the Trusts are not included as a component of
shareholders’ equity on the consolidated statement of condition, the Capital Securities are treated as capital for regulatory
purposes. Specifically, under applicable regulatory guidelines, the Capital Securities issued by the Trusts qualify as Tier 1
capital up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold
would qualify as Tier 2 capital. At December 31, 2022 and December 31, 2021, the total $134,642,000 of the Capital
Securities outstanding qualified as Tier 1 capital.
18
The following table illustrates key information about each of the Debentures and their interest rates at
December 31, 2022:
Junior
Subordinated
Deferrable
Interest
Debentures
(Dollars in thousands)
Repricing
Frequency
Interest Rate
Interest Rate
Index
Maturity Date
Optional
Redemption Date(1)
Trust VIII . . . . . . .
Trust IX . . . . . . . .
Trust X . . . . . . . . .
Trust XI . . . . . . . .
Trust XII . . . . . . .
25,774 Quarterly
41,238 Quarterly
21,021 Quarterly
25,990 Quarterly
20,619 Quarterly
October 2008
7.13 % LIBOR + 3.05
October 2011
5.36 % LIBOR + 1.62
February 2012
6.09 % LIBOR + 1.65
5.36 % LIBOR + 1.62
July 2012
6.21 % LIBOR + 1.45 September 2037 September 2012
October 2033
October 2036
February 2037
July 2037
$
134,642
(1) The Capital Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.
Critical Accounting Policies
We have established various accounting policies which govern the application of accounting principles in the
preparation of our consolidated financial statements. The significant accounting policies are described in the Notes to the
Consolidated Financial Statements. Certain accounting policies involve significant subjective judgments and assumptions
by management which have a material impact on the carrying value of certain assets and liabilities; management considers
such accounting policies to be critical accounting policies.
We consider our estimated ACL as a policy critical to the sound operations of our Subsidiary Banks. We adopted
the provisions of Accounting Standards Update No. 2016-13 to ASC 326, “Financial Instruments – Credit Losses,” on
January 1, 2020. ASU 2016-13 replaces the long-standing incurred loss model with an expected credit loss model that
recognizes credit losses over the life of a financial asset. Expected credit losses capture historical information, current
conditions, and reasonable and supportable forecasts of future conditions. The ACL is deducted from the amortized cost
of an instrument to present the net amount expected to be collected on the financial asset. Our ACL primarily consists of
the aggregate ACL estimates of our Subsidiary Banks. The estimates are established through charges to operations in the
form of charges to provisions for credit loss expense. Loan losses or recoveries are charged or credited directly to the ACL.
The ACL of each Subsidiary Bank is maintained at a level considered appropriate by management, based on estimated
current expected credit losses in the current loan portfolio, including information about past events, current conditions and
reasonable and supportable forecasts.
The estimation of the ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that
have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis.
The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk
characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general
loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain
sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation.
The general loan categories along with primary risk characteristics used in our calculation are as follows:
Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working
capital or equipment purchases. These loans are mostly secured by the collateral pledged by the borrower that is
directly related to the business activities of the company such as equipment, accounts receivable and inventory. The
borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory
into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured
by oil & gas production and loans secured by aircraft.
Construction and land development loans. This category includes the development of land from unimproved land to
lot development for both residential and commercial use and vertical construction across residential and commercial
19
real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the
price of construction materials, encounter zoning, entitlement and environmental issues, or encounter other factors
that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively
impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4
family development loans also include mortgage rate risk and the practice by the mortgage industry of more restrictive
underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and
lot inventory in the market.
Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner
occupied commercial properties, and non-owner-occupied commercial properties. Owner occupied commercial
properties include warehouses often along the border for import/export operations, office space where the borrower
is the primary tenant, restaurants and other single-tenant retail. Non-owner-occupied commercial properties include
hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry risk of repayment
when market values deteriorate, the business experiences turnover in key management, the business has an inability
to attract or keep occupancy levels stable, or when the market experiences an exit of a specific business type that is
significant to the local economy, such as a manufacturing plant.
1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases
or refinancing of existing mortgage loans. A small portion of this loan category is related to home equity lines of
credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or
underemployment and deteriorating market values of real estate.
Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts,
made to individuals. Repayment is primarily affected by unemployment or underemployment.
The loan pools are further broken down using a risk-based segmentation based on internal classifications for
commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one
segment. On a weekly basis, commercial loan past due reports are reviewed by the credit quality committee to determine
if a loan has any potential problems and if a loan should be placed on our internal Watch List report. Additionally, our
credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they
are past due and segregates any loans with potential problems for further review. The credit department will discuss the
potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the
evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the
review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch
List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.
Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring,
(iii) Special Review, (iv) Watch List—Pass, or (v) Watch List—Substandard, and (vi) Watch List—Doubtful. The loans
placed in the Special Review category and lower rated credits reflect our opinion that the loans reflect potential weakness
which require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular
basis, no less frequently than quarterly, with the credit department and the lending staff to determine if a change in category
is warranted. The loans placed in the Watch List—Pass category and lower rated credits reflect our opinion that the credit
contains weaknesses which represent a greater degree of risk, which warrant “extra attention.” Credits in this category are
reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in
category is warranted. The loans placed in the Watch List—Substandard category are considered to be potentially
inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral.
These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to
adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and
interest. Furthermore, there is the possibility that we may sustain some future loss if such weaknesses are not corrected.
The loans placed in the Watch List—Doubtful category have shown defined weaknesses and it is likely, based on current
information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Watch
List—Doubtful loans are placed on non-accrual when they are moved to that category.
20
For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the
credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—
Pass credits are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For
loans that are classified as Watch List—Doubtful, management evaluates these credits in accordance with ASC 310-10,
“Receivables,” and, if deemed necessary, a specific reserve is allocated to the loan. The specific reserve allocated under
ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate;
(ii) the loan’s observable market price; or (iii) net realizable value of the fair value of the collateral if the loan is collateral
dependent. Substantially all of our loans evaluated as Watch List—Doubtful under ASC 310-10 are measured using the
fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan under
ASC 310-10 if such loan is not collateral dependent.
Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if
needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then
evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to
the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition,
(ii) volume and trends in classified loans, delinquencies, non-accruals and TDR’s, (iii) concentration risk, (iv) trends in
underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative
factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics
and geopolitical events. Should any of the factors considered by management in evaluating the adequacy of the ACL
change, our estimate could also change, which could affect the level of future credit loss expense.
We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying
and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage
rate of any unfunded commitment multiplied by the historical loss rate, plus model risk adjustment, if any, of the on-
balance sheet loan pools.
Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the
estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and
the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our
methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable
and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate
for current expected credit losses change, our estimate of current expected credit losses could also change, which could
affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and
all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control,
including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in
interest rates and the view of regulatory authorities towards loan classifications.
Recent Accounting Standards Issued
See Note 1—Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated
Financial Statements for details of recently issued and recently adopted accounting standards and their impact on our
consolidated financial statements.
Common Stock and Dividends
We have issued and outstanding 62,144,589 shares of $1.00 par value common stock held by approximately 1,796
holders of record at February 17, 2023. The book value of the common stock at December 31, 2022 was $34.93 per share
compared with $38.17 per share at December 31, 2021.
Our common stock is traded on the NASDAQ National Market under the symbol “IBOC.” The following table
sets forth the approximate high and low bid prices in our common stock during 2022 and 2021, as quoted on the NASDAQ
National Market for each of the quarters in the two-year period ended December 31, 2021. Some of the quotations reflect
21
inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual
transactions. The closing sales price of our common stock was $46.26 per share at February 17, 2023.
2022:
2021:
High
Low
First quarter . . . . . . .
Second quarter . . . . .
Third quarter. . . . . . .
Fourth quarter. . . . . .
First quarter . . . . . . .
Second quarter . . . . .
Third quarter. . . . . . .
Fourth quarter. . . . . .
$
$
$
$
45.99
44.02
46.03
53.71
53.06
50.40
43.88
46.67
High
38.92
38.00
38.58
42.58
35.92
42.86
37.72
39.26
Low
We paid cash dividends of $.60 per share on February 28, and August 29, 2022, respectively, to record holders
of our common stock on February 15, and August 16, 2022, respectively. We paid cash dividends of $.60 and $.55 per
share on February 17, and September 3, 2021, respectively, to record holders of our common stock on February 5, and
August 20, 2021, respectively.
Our principal source of funds to pay cash dividends on our common stock is cash dividends from our Subsidiary
Banks. For a discussion of the limitations, please see Note 19 of Notes to Consolidated Financial Statements.
Stock Repurchase Program
In April 2009, the Board of Directors re-established a formal stock repurchase program that authorized the
repurchase of up to $40 million of common stock within the following 12 months. Annually since then, including on
February 23, 2022, the Board of Directors extended and increased the repurchase program to purchase up to $150 million
of common stock during the 12-month period commencing on March 15, 2022. Shares of common stock may be purchased
from time to time on the open market or through privately negotiated transactions. Shares purchased in this program will
be held in treasury for reissue for various corporate purposes, including employee compensation plans. During the fourth
quarter of 2022, the Board of Directors adopted a Rule 10b-18 trading plan and a Rule 10b5-1 trading plan and intends to
adopt additional Rule 10b-18 and Rule 10b5-1 trading plans, which will allow us to purchase shares of our common stock
during certain open and blackout periods when we ordinarily would not be in the market due to trading restrictions in our
insider trading policy. During the terms of both a Rule 10b-18 and a Rule 10b5-1 trading plan, purchases of common stock
are automatic to the extent the conditions of the plan’s trading instructions are met. Shares purchased under these trading
plans will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans.
As of February 17, 2023, a total of 13,584,730 shares had been repurchased under all programs at a cost of $409,820,000.
We are not obligated to purchase shares under our stock repurchase program outside of the Rule 10b-18 and Rule 10b5-1
trading plans.
Except for repurchases in connection with the administration of an employee benefit plan in the ordinary course
of business and consistent with past practices, common stock repurchases are only conducted under publicly announced
repurchase programs approved by the Board of Directors. The following table includes information about common stock
share repurchases for the quarter ended December 31, 2022.
22
Total Number
of Shares
Purchased
Average
Price Paid
Per
Share
Total Number of
Shares
Purchased as
Part of a
Publicly-
Announced
Program
October 1 – October 31, 2022 . . . . . . . .
November 1 – November 30, 2022 . . . .
December 1 – December 31, 2022 . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
1,239
1,007
2,246 $
—
51.84
45.20
48.86
— $
1,239
1,007
2,246
Approximate
Dollar Value of
Shares Available
for
Repurchase(1)
101,440,000
101,376,000
101,331,000
(1) The repurchase program was increased and extended on February 23, 2022 and allows for the repurchase of up to an additional $150,000,000 of
treasury stock through March 15, 2023.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2022, with respect to our equity compensation
plans:
Plan Category
Equity Compensation plans approved by security
holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(A)
(B)
Number of securities to Weighted average
exercise price of
be issued upon exercise
outstanding options,
of outstanding options,
warrants and rights
warrants and rights
(C)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column A)
461,822
461,822
$
$
29.67
29.67
—
—
23
COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN
Stock Performance
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
$200
$150
$100
1-----------------------------r-:..----~ - - ---I
/
........
.......
....... ,
$50
2017
2018
2019
2020
2021
2022
International Bancshares Corporation
--
S&P MidCap 400 Index
-4-•
S&P 400 Regional Banks
Total Return To Shareholders
(Includes reinvestment of dividends)
Base
Period
2017
2018
2019
INDEXED RETURNS
December 31,
2020
2021
2022
Company / Index
International Bancshares
Corporation. . . . . . . . . . . . . . . . . . . . .
S&P 400 Index . . . . . . . . . . . . . . . . . . . .
S&P 400 Banks . . . . . . . . . . . . . . . . . . .
100
100
100
88.22
88.92
78.60
113.51
112.21
97.95
102.72
127.54
89.52
119.68
159.12
126.83
132.77
138.34
121.59
24
Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors
International Bancshares Corporation and its Subsidiaries
■ -
RS~A
RSMUSLLP
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of condition of International Bancshares
Corporation and its Subsidiaries (the Company) as of December 31, 2022 and 2021, the related
consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each
of the three years in the period ended December 31, 2022, and the related notes to the consolidated
financial statements (collectively, the financial statements). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and
2021, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2022, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated
February 23, 2023, expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing
a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
THE POWER OF BEING UNDERSTOOD
AUDIT I TAX I CONSULTING
25
RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Visit rsmus.com/aboutus for more information regarding RSM US LLP and
RSM International.
Allowance for Credit Losses
As described in Note 4 of the consolidated financial statements, the company established an allowance
for credit losses totaling $125,972,000 as of December 31, 2022. The allowance for credit losses is
derived from 1) a loss-rate methodology that measures lifetime losses on loan pools that have similar risk
characteristics; and 2) estimated losses on individually evaluated loans that do not have similar risk
characteristics. The segmentation of the loan portfolio into pools requires a balancing process between
capturing similar risk characteristics and sufficient loss history to provide relevant results. Loan pools are
further broken down using a risk-based segmentation based on internal classifications of credit quality.
Within each loan pool, the lifetime historical loss-rate is evaluated and, if needed, is supplemented with
peer loss rates through a model risk adjustment. Certain qualitative factors are applied at the loan pool
level to incorporate management’s two-year forecast period followed by a reversion to the pool’s average
lifetime loss-rate. Those qualitative factors include: (i) trends in portfolio volume and composition, (ii)
volume and trends in classified loans, delinquencies, non-accruals and troubled debt restructurings
(TDR’s), (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies,
procedures, and strategies, (vi) economic conditions, and (vii) operational and other risk factors to
capture potential losses arising from fraud, natural disasters, pandemics, and geopolitical events.
We identified the qualitative factor component of the allowance for credit losses as a critical audit matter.
Auditing management’s estimate of the qualitative factors required a high degree of auditor judgment due
to the nature of the adjustments and the subjectivity in judgments applied by management in forming
them.
Our audit procedures related to the Company’s qualitative factors included, the following, among others:
We obtained an understanding of the relevant controls related to the allowance for credit losses,
including the qualitative factors, and tested such controls for design and operating effectiveness,
including controls related to management’s review of the qualitative factors and approval of the
allowance for credit losses calculation.
We evaluated the appropriateness and consistency of management’s methods and assumptions
used to determine qualitative factors by (1) evaluating management’s identification and quantification
of qualitative factors; (2) testing the completeness and accuracy of data and information used in
calculating the components of the qualitative factors; (3) evaluating the reasonableness, directional
consistency, and magnitude of the quantification of the qualitative factors; and (4) reviewing
subsequent events and considering their impact on judgments applied in forming the qualitative factor
component of the allowance for credit losses as of the consolidated balance sheet date.
We have served as the Company’s auditor since 2007.
Austin, Texas
February 23, 2023
26
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition
December 31, 2022 and 2021
(Dollars in Thousands, Except Per Share Amounts)
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Held to maturity debt securities (Market value of $3,400 on December 31, 2022
December 31,
2022
December 31,
2021
$ 2,087,724
$ 3,209,242
and $3,400 on December 31, 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,400
3,400
Available for sale debt securities (Amortized cost of $5,018,996 on
December 31, 2022 and $4,254,960 on December 31, 2021) . . . . . . . . . . . . . . . . .
Equity securities with readily determinable fair values. . . . . . . . . . . . . . . . . . . . . . . .
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash surrender value of life insurance policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,417,796
5,358
4,426,554
7,430,603
(125,972)
7,304,631
431,612
45,787
358,910
300,589
282,532
263,137
4,213,920
6,079
4,223,399
7,209,151
(110,374)
7,098,777
447,082
30,593
296,882
297,218
282,532
160,511
$ 15,501,476 $ 16,046,236
See accompanying notes to consolidated financial statements.
27
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition Continued
December 31, 2022 and 2021
(Dollars in Thousands, Except Per Share Amounts)
December 31,
2022
December 31,
2021
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings and interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated deferrable interest debentures. . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
5,846,055
4,745,768
2,068,184
12,660,007
431,191
10,944
134,642
219,933
13,456,717
5,838,526
4,590,548
2,188,803
12,617,877
439,672
436,138
134,642
109,426
13,737,755
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued
96,420,456 shares on December 31, 2022 and 96,350,977 shares on
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96,420
154,061
2,695,567
(470,497)
2,475,551
96,351
152,144
2,470,710
(31,980)
2,687,225
Less cost of shares in treasury, 34,278,617 shares on December 31, 2022
and 32,979,273 on December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(430,792)
2,044,759
15,501,476
$
(378,744)
2,308,481
16,046,236
See accompanying notes to consolidated financial statements.
28
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands, Except Per Share Amounts)
Interest income:
Loans, including fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
2021
2020
$ 402,177
$ 359,215
$
377,579
74,988
2,541
46,075
525,781
34,331
1,483
3,074
398,103
46,095
2,434
900
427,008
Interest expense:
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated deferrable interest debentures . . . . . . . . . . . . . . . . .
12,686
11,157
2,495
6,781
5,037
4,110
11,655
621
7,654
2,791
6,358
19,230
926
8,773
3,832
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,156
26,831
39,119
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
487,625
371,272
387,889
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,651
7,955
45,379
Net interest income after provision for credit losses . . . . . . . . . . . . . . .
465,974
363,317
342,510
Non-interest income:
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,781
66,205
61,983
Other service charges, commissions and fees
Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,253
8,568
—
17,538
32,994
54,280
8,007
(16)
68,807
25,043
48,986
7,822
(5)
4,920
26,873
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187,134 $ 222,326
$ 150,579
See accompanying notes to consolidated financial statements.
29
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income, continued
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands, Except Per Share Amounts)
2022
2021
2020
Non-interest expense:
Employee compensation and benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . $
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of bank premises and equipment . . . . . . . . . . . . . . . . . . .
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit insurance assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operations, other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software and software maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127,722 $
25,654
21,821
11,292
6,987
122
4,588
15,271
57,012
123,480 $
26,176
25,028
7,890
4,389
5,073
4,037
17,794
49,449
130,039
24,909
28,318
12,546
1,870
9,808
4,284
19,238
50,319
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270,469
263,316
281,331
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
382,639
322,327
211,758
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82,407
68,405
44,439
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
300,232 $
253,922 $
167,319
Basic earnings per common share:
Weighted average number of shares outstanding. . . . . . . . . . . . . . . . . .
Net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
62,658,414
63,352,737
4.79 $
4.01 $
Fully diluted earnings per common share:
Weighted average number of shares outstanding. . . . . . . . . . . . . . . . . .
Net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
62,810,234
63,486,366
4.78 $
4.00 $
63,725,819
2.63
63,853,135
2.62
See accompanying notes to consolidated financial statements.
30
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended December 31, 2022, 2021, and 2020
(Dollars in Thousands)
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax:
Net unrealized holding (losses) gains on securities available for sale arising
during period (net of tax effects of $(116,568), $(14,040) and $4,911) . . . .
Reclassification adjustment for losses on securities available for sale
included in net income (net of tax effects of $0, $3 and $1) . . . . . . . . . . . . .
2022
2021
2020
$ 300,232 $ 253,922 $ 167,319
(438,517)
(52,818)
18,476
—
(438,517)
13
(52,805)
4
18,480
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (138,285) $ 201,117 $ 185,799
See accompanying notes to consolidated financial statements.
31
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands, except per share amounts)
Balance at December 31, 2019. . . . . . . . . . . . $
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Dividends:
Preferred
Stock
Number
of
Shares
— 96,215
—
—
Common
Stock
96,215
—
Surplus
148,075
—
Other
Retained Comprehensive Treasury
Earnings
Income (Loss)
2,200,568
167,319
2,345
—
Stock
—
Total
(329,150) $ 2,118,053
167,319
Cash ($1.10 per share) . . . . . . . . . . . . .
Purchase of treasury (1,946,228 shares) . .
Exercise of stock options. . . . . . . . . . . . . . . .
Stock compensation expense recognized
in earnings. . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative adjustment for adoption of
new accounting standards. . . . . . . . . . . . . .
Other comprehensive (loss), net of tax:
Net change in unrealized gains and
losses on available for sale
securities, net of reclassification
adjustment . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2020. . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Dividends:
Cash ($1.15 per share) . . . . . . . . . . . . .
Purchase of treasury (17,984 shares) . . . .
Exercise of stock options. . . . . . . . . . . . . . . .
Stock compensation expense recognized
in earnings. . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss), net of tax:
Net change in unrealized gains and
losses on available for sale
securities, net of reclassification
adjustments . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021. . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Dividends:
Cash ($1.20 per share) . . . . . . . . . . . . .
Purchase of treasury (1,299,344 shares) . .
Exercise of stock options. . . . . . . . . . . . . . . .
Stock compensation expense recognized
in earnings. . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax:
Net change in unrealized gains and
losses on available for sale
securities, net of reclassification
adjustments . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2022. . . . . . . . . . . .
—
—
—
—
—
—
—
26
—
—
—
—
26
—
—
—
—
516
743
—
(69,928)
—
—
—
(8,333)
—
—
— (48,878)
—
—
(69,928)
(48,878)
542
—
—
—
—
743
(8,333)
—
—
— 96,241
—
—
—
96,241
—
—
149,334
—
—
2,289,626
253,922
18,480
20,825
—
—
(378,028)
—
18,480
2,177,998
253,922
—
—
—
—
—
—
110
—
—
—
110
—
—
2,304
(72,838)
—
—
—
506
—
—
—
—
—
—
(716)
—
(72,838)
(716)
2,414
—
506
—
—
— 96,351 $ 96,351 $ 152,144 $ 2,470,710 $
—
300,232
—
—
—
—
—
—
(52,805)
(52,805)
(31,980) $ (378,744) $ 2,308,481
300,232
—
—
—
—
—
—
—
—
—
69
—
—
—
69
—
—
—
1,468
(75,375)
—
—
—
—
— (52,048)
—
—
(75,375)
(52,048)
1,537
449
—
—
—
449
— (438,517)
(438,517)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(470,497) $ (430,792) $ 2,044,759
—
— 96,420 $ 96,420 $ 154,061 $ 2,695,567 $
—
—
—
—
See accompanying notes to consolidated financial statements.
32
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands)
Operating activities:
2022
2021
2020
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,232 $
253,922 $
167,319
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specific reserve, other real estate owned . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of bank premises and equipment . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of bank premises and equipment . . . . . . . . . . . . . .
Gain on sale of other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of investment securities discounts . . . . . . . . . . . . . . . . . . . . .
Amortization of investment securities premiums . . . . . . . . . . . . . . . . .
Investment securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss (gain) on equity securities with readily
determinable fair values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from settlements of claims . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Earnings) losses from affiliates and other investments . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in accrued interest receivable . . . . . . . . . . . . . . . . .
Decrease in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
21,651
1,627
21,821
(3,110)
(2,096)
(1,785)
13,907
—
721
—
449
(15,894)
10,619
(15,194)
12,975
42,018
7,955
2,655
25,028
601
(170)
(702)
36,380
16
123
2,870
506
(68,034)
3,542
7,288
25,220
(5,519)
45,379
1,539
28,318
(40)
(892)
(500)
39,039
5
(107)
—
743
74
(3,122)
(1,261)
42,571
(13,932)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
387,941
291,681
305,133
Investing activities:
Proceeds from maturities of securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and calls of available for sale securities . . . . . . . .
Purchases of available for sale securities . . . . . . . . . . . . . . . . . . . . . . . .
Principal collected on mortgage-backed securities . . . . . . . . . . . . . . . .
Net (increase) decrease in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of bank premises and equipment. . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of bank premises and equipment . . . . . . . . . . . . .
Proceeds from sales of other real estate owned . . . . . . . . . . . . . . . . . . .
2,200
800
(1,455,249)
756,092
(228,340)
(79,669)
8,886
(19,213)
13,496
8,969
1,200
5,890
(2,856,135)
1,612,679
309,575
(61,783)
63,356
(10,390)
11,446
8,273
1,075
42,350
(1,819,814)
2,058,626
(647,213)
(44,447)
64,860
(6,725)
904
6,679
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
(992,028)
(915,889)
(343,705)
See accompanying notes to consolidated financial statements.
33
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands)
Financing activities:
2022
2021
2020
Net increase in non-interest-bearing demand deposits . . . . . . . . . . . . . . $
Net increase in savings and interest-bearing demand deposits . . . . . . . .
Net (decrease) increase in time deposits. . . . . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in securities sold under repurchase
7,529 $ 1,122,712 $ 1,169,909
584,676
738,043
141,241
35,262
155,220
(120,619)
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,481)
(425,194)
(52,048)
1,537
(75,375)
11,524
(189)
(716)
2,414
(72,838)
191,612
(190,184)
(48,878)
542
(69,928)
Net cash (used in) provided by financing activities. . . . . . . . . . . . . . . .
(517,431)
1,836,212
1,778,990
(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
(1,121,518)
1,212,004
1,740,418
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . .
3,209,242
1,997,238
256,820
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,087,724 $ 3,209,242 $ 1,997,238
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,355 $
22,118
29,007 $
47,394
41,975
34,826
Non-cash investing and financing activities:
Purchases of available-for-sale securities not yet settled. . . . . . . . . . . . . $
Net transfers from loans to other real estate owned. . . . . . . . . . . . . . . . .
Net transfers from bank premises and equipment to other assets . . . . . .
80,000 $
835
2,476
— $
16,388
—
—
4,526
4,260
See accompanying notes to consolidated financial statements.
34
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Our accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”) and
to general practices within the banking industry. The following is a description of the more significant of those policies.
Consolidation and Basis of Presentation
Our consolidated financial statements include the accounts of the International Bancshares Corporation, its
wholly owned Subsidiary Banks and its wholly owned non-bank subsidiaries, IBC Trading Company, Premier Tierra
Holdings, Inc., IBC Charitable and Community Development Corporation, IBC Capital Corporation and Diamond Beach
Holdings, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.
We, through our Subsidiary Banks, are primarily engaged in the business of banking, including the acceptance of
checking and savings deposits and the making of commercial, real estate, personal, home improvement, automobile and
other installment and term loans. Our primary markets are north, south, central, and southeast Texas and the state of
Oklahoma. Each of our Subsidiary Banks is highly active in facilitating international trade along the United States border
with Mexico and elsewhere. Although our loan portfolio is diversified, the ability of our debtors to honor their contracts
is primarily dependent upon the economic conditions in our trade area. In addition, the investment portfolio is directly
impacted by fluctuations in market interest rates. We are subject to the regulations of certain federal agencies as well as
the Texas Department of Banking and the Oklahoma Department of Banking and undergo periodic examinations by those
regulatory authorities. Such agencies may require certain standards or impose certain limitations based on their judgments
or changes in law and regulations.
We own one insurance-related subsidiary, IBC Insurance Agency, Inc., a wholly owned subsidiary of our
Subsidiary Bank, International Bank of Commerce, Laredo. The insurance-related subsidiary does not conduct
underwriting activities.
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the dates of the statement of condition and income and expenses for the periods.
Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to
significant changes in the near-term relate to the determination of the allowance for credit losses (“ACL”).
Subsequent Events
We have evaluated all events or transactions that occurred through the date we issued these financial statements.
During this period, we did not have any material recognizable or non-recognizable subsequent events.
Investment Securities
We classify debt securities into one of these categories: held-to-maturity, available-for-sale, or trading. Such
classifications are reassessed for appropriate classification at each reporting date. Securities that are intended and expected
to be held until maturity are classified as “held-to-maturity” and are carried at amortized cost for financial statement
reporting. Securities that are not positively expected to be held until maturity but are intended to be held for an indefinite
period of time are classified as “available-for-sale” or “trading” and are carried at their fair value. Unrealized holding gains
and losses are included in net income for those securities classified as “trading,” while unrealized holding gains and losses
related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other
comprehensive income (loss) and in shareholders’ equity as accumulated other comprehensive income (loss) until realized.
Unrealized gains and losses related to equity securities with readily determinable fair values are included in net income.
In accordance with ASU 2016-13, which we adopted on January 1, 2020, available-for-sale and held-to-maturity debt
securities in an unrealized loss position must be evaluated for the underlying cause of the loss. In the event that the
deterioration in value is attributable to credit related reasons, then the amount of credit-related impairment would be
recorded as a charge to our ACL with subsequent changes in the amount of impairment, up or down, also recorded through
35
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
our ACL. The exception to this process will occur if we intend to sell an impaired available-for-sale debt security or if we
will more likely than not be required to sell a credit impaired available-for-sale debt security prior to the value recovering
to the security’s amortized cost. In those situations, the entire credit-related impairment amount would be required to be
recognized in earnings. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at
December 31, 2022 and have determined that no debt securities in an unrealized loss position are arising from credit related
reasons and have therefore not recorded any allowances for debt securities in our ACL for the periods. We did not maintain
any trading securities during the three-year period ended December 31, 2022.
Mortgage-backed securities held at December 31, 2022 and 2021 represent participating interests in pools of
long-term first mortgage loans originated and serviced by the issuers of the securities. Mortgage-backed securities are
either issued or guaranteed by the U.S. government or its agencies including Freddie Mac, Fannie Mae, Ginnie Mae or
other non-government entities. Investments in residential mortgage-backed securities issued by Ginnie Mae are fully
guaranteed by the U. S. government. Investments in residential mortgage-backed securities issued by Freddie Mac and
Fannie Mae are not fully guaranteed by the U.S. government; however, we believe that the quality of the bonds is similar
to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into
conservatorship by the federal government in 2008 and because securities issued by others that are collateralized by
residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated
securities. Market interest rate fluctuations can affect the prepayment speed of principal and the yield on the security.
Premiums and discounts are amortized using the level yield or “interest method” over the terms of the securities.
Declines in the fair value of held-to-maturity and available-for sale-securities below their cost that are deemed to be other
than temporary are reflected in earnings as realized losses. In determining whether other-than-temporary impairment
exists, management considers many factors, including (i) the length of time and the extent to which the fair value has been
less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) our intent to hold and our
determination of whether we will more likely than not be required to sell the security prior to a recovery in fair value. If
we determine that (i) we intend to sell the security or (ii) it is more likely than not that we will be required to sell the
security before it’s anticipated recovery, the other-than-temporary impairment that is recognized in earnings is equal to
the difference between the fair value of the security and our amortized cost of the security. If we determine that we (i) do
not intend to sell the security and (ii) we will not be more likely than not required to sell the security before it’s anticipated
recovery, the other-than-temporary impairment is segregated into its two components (i) the amount of impairment related
to credit loss and (ii) the amount of impairment related to other factors. The difference between the present value of the
cash flows expected to be collected and the amortized cost is the credit loss recognized through earnings and an adjustment
to the cost basis of the security. The amount of impairment related to other factors is included in other comprehensive
income (loss). Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific
identification method.
Equity Securities
Equity securities with readily determinable fair values at December 31, 2022 and December 31, 2021 consist
primarily of Community Reinvestment Act funds. Unrealized gains and losses on the equity securities are recognized in
net income.
Provision and Allowance for Credit Losses
We adopted the provisions of Accounting Standards Update No. 2016-13 to ASC 326, “Financial Instruments –
Credit Losses,” on January 1, 2020. ASU 2016-13 replaces the long-standing incurred loss model with an expected credit
loss model that recognizes credit losses over the life of a financial asset. Expected credit losses capture historical
information, current conditions, and reasonable and supportable forecasts of future conditions. The ACL is deducted from
the amortized cost of an instrument to present the net amount expected to be collected on the financial asset. Our ACL
primarily consists of the aggregate ACL estimates of our Subsidiary Banks. The estimates are established through charges
to operations in the form of charges to provisions for credit loss expense. Loan losses or recoveries are charged or credited
directly to the ACL. The ACL of each Subsidiary Bank is maintained at a level considered appropriate by management,
based on estimated current expected credit losses in the current loan portfolio, including information about past events,
current conditions and reasonable and supportable forecasts.
36
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the
estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and
the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our
methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable
and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate
for current expected credit losses change, our estimate of current expected credit losses could also change, which could
affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and
all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control,
including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in
interest rates and the view of regulatory authorities towards loan classifications. We believe that the allowance for probable
loan losses is adequate.
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well
as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial, financial and agricultural
or real estate loans are generally considered by management to represent a loss, in whole or part, (i) when an exposure
beyond any collateral coverage is apparent, (ii) when no further collection of the portion of the loan so exposed is
anticipated based on actual results, (iii) when the credit enhancements, if any, are not adequate, and (iv) when the
borrower’s financial condition would indicate so. Generally, unsecured consumer loans are charged-off when 90 days past
due.
Loans
Loans are reported at the principal balance outstanding, net of unearned discounts. Interest income on loans is
reported on an accrual basis. Loan fees and costs associated with originating the loans are accreted or amortized over the
life of the loan using the interest method. We originate mortgage loans that may subsequently be sold to an unaffiliated
third party. The loans are not securitized and if sold, are sold without recourse. Loans held for sale are carried at cost and
the principal amount outstanding is not significant to the consolidated financial statements.
Doubtful Loans
Doubtful loans are those loans where it is probable that all amounts due according to contractual terms of the loan
agreement will not be collected. Doubtful loans are measured based on (i) the present value of expected future cash flows
discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral
if the loan is collateral dependent. Substantially all our doubtful loans are measured at the fair value of the collateral. In
limited cases, we may use other methods to determine the level of impairment of a loan if such loan is not collateral
dependent.
37
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Troubled Debt Restructured Loans
Troubled debt restructured loans (“TDR”) are those loans where, for reasons related to a borrower’s difficulty to
repay a loan, we grant a concession to the borrower that we would not normally consider in the normal course of business.
In accordance with interagency guidance issued in March 2020, certain short-term deferrals are not considered troubled
debt restructurings. The original terms of the loan are modified or restructured. The terms that may be modified include a
reduction in the original stated interest rate, an extension of the original maturity of the loan, a renewal of the loan at an
interest rate below current market rates, a reduction in the principal amount of debt outstanding, a reduction in accrued
interest or deferral of interest payments. A loan classified as a TDR is classified as a doubtful loan and included in the
doubtful loan totals. A TDR loan may be returned to accrual status when the loan is brought current, has performed in
accordance with the restructured terms for a reasonable period of time, is at the current market rate, and the ultimate
collectability of the outstanding principal and interest is no longer questionable, however, although those loans may be
placed back on accrual status, they will continue to be classified as doubtful. Consistent with regulatory guidance, a TDR
loan that is subsequently modified, but has shown sustained performance and classification as a TDR, will be removed
from TDR status provided that the modified terms were market-based at the time of modification.
Non-Accrual Loans
The non-accrual loan policy of our Subsidiary Banks is to discontinue the accrual of interest on loans when
management determines that it is probable that future interest accruals will be un-collectible. As it relates to consumer
loans, management charges-off those loans when the loan is contractually 90 days past due. Under special circumstances,
a consumer or non-consumer loan may be more than 90 days delinquent as to interest or principal and not be placed on
non-accrual status. This situation generally results when a Subsidiary Bank has a borrower who is experiencing financial
difficulties, but not to the extent that requires a restructuring of indebtedness. The majority of this category is composed
of loans that are considered to be adequately secured and/or for which there are expected future payments. When a loan is
placed on non-accrual status, any interest accrued, not paid is reversed and charged to operations against interest income.
As it relates to non-consumer loans that are not 90 days past due, management will evaluate each of these loans to
determine if placing the loan on non-accrual status is warranted. Interest income on non-accrual loans is recognized only
to the extent payments are received or when, in management’s opinion, the debtor’s financial condition warrants
reestablishment of interest accruals.
Other Real Estate Owned and Repossessed Assets
Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other
real estate is carried at the lower of the recorded investment in the property or its fair value less estimated costs to sell such
property (as determined by independent appraisal). Prior to foreclosure, the value of the underlying loan is written down
to the fair value of the real estate to be acquired by a charge to the ACL, if necessary. Any subsequent write-downs are
charged against other non-interest expense through a valuation allowance. Other real estate owned totaled approximately
$30,144,000 and $35,332,000 at December 31, 2022 and 2021, respectively. Other real estate owned is included in other
assets. Repossessed assets consist primarily of non-real estate assets acquired by foreclosure. Prior to foreclosure, the value
of the underlying loan is written down to the fair value of the asset to be repossessed by a charge to the ACL, if necessary.
Repossessed assets are included in other assets on the consolidated financial statements and totaled approximately
$4,637,000 and $4,798,000 at December 31, 2022 and 2021, respectively.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on
straight-line and accelerated methods over the estimated useful lives of the assets. Repairs and maintenance are charged
to operations as incurred and expenditures for renewals and betterments are capitalized. We primarily own all the property
we occupy, with the exception of certain branches operating in grocery store or retail shopping centers and certain ATM
locations, which are all under operating leases as classified under guidance prior to the issuance of ASU 2016-02, “Leases.”
38
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Other Investments
Other investments include equity investments in non-financial companies, as well as equity securities with no
readily determinable fair market value. Equity investments are accounted for using the equity method of accounting. Equity
securities with no readily determinable fair value are accounted for using the cost method.
Revenue Recognition
Our revenue is primarily comprised of net interest income on financial assets and liabilities, which are excluded
from the scope of ASU No. 2014-09 to ASC 606, “Revenue from Contracts with Customers.” The remaining non-interest
revenue streams were identified and then analyzed under the provisions of the update, to: (i) identify the contract,
(ii) identify the performance obligation, (iii) determine the transaction price, (iv) allocate the transaction price to the
performance obligations, and (v) recognize revenue when the performance obligation was satisfied. Our non-interest
revenue contracts with customers are primarily short term and our performance obligation is satisfied at a single point in
time, typically within a single period. No changes to our existing methods for recognizing revenue were made as a result
of the accounting standards update.
Income Taxes
Deferred income tax assets and liabilities are determined using the asset and liability method. Under this method,
the net deferred tax asset or liability is determined based on the tax effects of the differences between the book and tax
basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. We
file a consolidated federal income tax return with our subsidiaries.
Recognition of deferred tax assets is based on management’s assessment that the benefit related to certain
temporary differences, tax operating loss carry forwards, and tax credits are more likely than not to be realized. A valuation
allowance is recorded for the amount of the deferred tax items for which it is more likely than not that the tax benefits will
not be realized.
We evaluate uncertain tax positions at the end of each reporting period. We may recognize the tax benefit from
an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from
any such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized
upon ultimate settlement. As of December 31, 2022 and 2021, respectively, after evaluating all uncertain tax positions, we
have recorded no liability for unrecognized tax benefits at the end of the reporting period. We would recognize any interest
accrued on unrecognized tax benefits as other interest expense and penalties as other non-interest expense. During the
years ended December 31, 2022, 2021 and 2020, we recognized no interest expense or penalties related to uncertain tax
positions.
We file consolidated tax returns in the U.S. Federal jurisdiction and various state jurisdictions. We are no longer
subject to U.S. federal or state income tax examinations by tax authorities for years before 2019.
Stock Options and Stock Appreciation Rights
Compensation expense for stock-based awards is based on the market price of the stock on the measurement date,
which is generally the date of grant, and is recognized ratably over the service period of the award. The fair value of stock
options and stock appreciation rights granted was estimated using a Black-Sholes-Merton pricing model. These models
were developed for use in estimating the fair value of publicly traded options and stock appreciation rights that have no
vesting restrictions and are fully transferable. Additionally, these models require the input of highly subjective
assumptions. Because our employee stock options and stock appreciation rights have characteristics significantly different
from those of publicly traded options and appreciation rights, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management’s opinion, the Black-Scholes-Merton pricing models do not
necessarily provide a reliable single measure of the fair value of our stock options and stock appreciation rights.
39
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Net Income Per Share
Basic Earnings Per Share (“EPS”) is calculated by dividing net income by the weighted average number of
common shares outstanding. The computation of diluted EPS assumes the issuance of common shares for all dilutive
potential common shares outstanding during the reporting period. The dilutive effect of stock options is considered in
earnings per share calculations, if dilutive, using the treasury stock method.
Goodwill and Identified Intangible Assets
Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill is tested for
impairment at least annually or on an interim basis if an event triggering impairment may have occurred. As of October 1,
2022, after completing goodwill testing, we have determined that no goodwill impairment exists.
Identified intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill
because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or
in combination with a related contract, asset, or liability. Our identified intangible assets relate to core deposits and contract
rights. As of December 31, 2022, we have determined that no impairment of identified intangibles exists. Identified
intangible assets with definite useful lives are amortized on an accelerated basis over their estimated life. See Note 6—
Goodwill and Other Intangible Assets.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of the asset
to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value of
the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the statement of
condition and reported at the lower of the carrying value or fair value less costs to sell and are no longer depreciated. The
assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset
and liability sections of the statement of condition.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, we consider all short-term investments with a maturity
at date of purchase of three months or less to be cash equivalents. Also, we report transactions related to deposits and loans
to customers on a net basis.
Accounting for Transfers and Servicing of Financial Assets
We account for transfers and servicing of financial assets and extinguishments of liabilities based on the
application of a financial-components approach that focuses on control. After a transfer of financial assets, we recognize
the financial and servicing assets we control and liabilities we have incurred, derecognize financial assets when control
has been surrendered and derecognize liabilities when extinguished. We have retained mortgage servicing rights in
connection with the sale of mortgage loans. Because we may not initially identify loans as originated for resale, all loans
are initially treated as held for investment. The value of the mortgage servicing rights are reviewed periodically for
impairment and are amortized in proportion to, and over the period of estimated net servicing income or net servicing
losses. The value of the mortgage servicing rights is not significant to the consolidated statements of condition.
Segments of an Enterprise and Related Information
We operate as one segment. The operating information used by our chief executive officer for purposes of
assessing performance and making operating decisions is the consolidated financial statements presented in this report.
40
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
We have five active operating subsidiaries, namely, the Subsidiary Banks. We apply the provisions of ASC Topic 280,
“Segment Reporting,” in determining our reportable segments and related disclosures.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes unrealized gains and losses on securities available for sale.
Advertising
Advertising costs are expensed as incurred.
Reclassifications
Certain amounts in the prior year’s presentations have been reclassified to conform to the current presentation.
These reclassifications had no effect on previously reported net income or shareholders’ equity.
New Accounting Standards
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 to ASC 326, “Financial Instruments –
Credit Losses.” The update amends existing standards for accounting for credit losses for financial assets. The update
requires that the expected credit losses on the financial instruments held as of the end of the period being reported be
measured based on historical experience, current conditions, and reasonable and supportable forecasts. The update also
expands the required disclosures related to significant estimates and judgements used in estimating credit losses, as well
as the credit quality and underwriting standards of an organization’s financial assets. The update also amended the
accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
The impact of the adoption of the standard is to be recorded as a cumulative-effect adjustment to retained earnings as of
the beginning of the first reporting period in which the guidance is adopted. The accounting standard was effective for us
on January 1, 2020. The task force formed last year, which includes key members of the teams that work with the
calculation of the allowance for probable loan losses plus members representing the corporate accounting and risk
management areas, has worked with the implementation of the update and validation to complete our model/tool. Based
on the composition of the portfolio at December 31, 2019 and after finalizing the methodology, the adoption of the update
increased our allowance for probable loan losses (referred to as the ACL under ASU 2016-13), by approximately 17.2%,
resulting in a cumulative-effect adjustment to retained earnings of approximately $8.3 million, net of tax. Please refer to
Note 4 – Allowance for Credit Losses and the Critical Accounting Policies discussion in Management’s Discussion and
Analysis.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, to ASC 740, “Income Taxes.”
The update amends existing guidance with the intention of simplifying the accounting for income taxes. Specifically, the
update removes some exceptions in existing guidance around intraperiod tax allocations, recognition of deferred tax
liabilities for certain changes in investments in foreign subsidiaries and to the general methodology for calculating taxes
on interim periods when year to date losses exceed the anticipated loss for the year. Additionally, the update clarifies and
provides more guidance with respect to the classification of franchise or similar taxes, requirements to evaluate when a
step up in the tax basis of goodwill should be considered, eliminates the requirement that a consolidated entity allocate a
portion of current and deferred tax expense to a legal entity that is not subject to tax, requires that an entity reflect the
effect of changes in tax laws and tax rates in the effective tax rate computed in the interim period that includes the
enactment date and makes minor changes for taxes related to employee stock ownership plans and investments in qualified
affordable housing projects accounted for using the equity method. The update is effective for fiscal years beginning after
December 15, 2020. The adoption of the update did not have a significant impact on our consolidated financial statements.
In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic
848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The update provides optional
guidance for a limited period of time to ease the potential burden in accounting for and recognizing the effects of reference
41
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
rate reform on financial reporting. The practical expedients and exceptions in the update apply only to contracts, hedging
relationships and other transactions affected by reference rate reform if certain criteria are met. The update does not apply
to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for
hedging relationships existing as of December 31, 2022 that an entity has elected certain optional expedients for and that
are retained through the end of the hedging relationship. The update was effective as of the date of issuance and can be
applied through December 31, 2022. We have not adopted the provisions of the update and do not anticipate that the
adoption of the update will have a significant impact on our consolidated financial statements.
In January 2021, the FASB issued Accounting Standards Update No. 2021-01, “Reference Rate Reform (Topic
848): Scope.” The update clarifies the applicability of the practical expedients and exceptions issued in ASU 2020-04 to
derivative instruments that use an interest rate for margining, discounting or contract price alignment that is modified as a
result of reference rate reform. The update is intended to capture the incremental consequences of the scope clarification
and tailor the existing guidance to derivative instruments affected by the discounting transition. The update was effective
as of the date of issuance and can be applied through December 31, 2022. We have not adopted the provisions of the
update and do not anticipate that the adoption of the update will have a significant impact on our consolidated financial
statements.
(2) Investment Securities, Equity Securities with Readily Determinable Fair Values and Other Investments
In accordance with ASU 2016-13, which we adopted on January 1, 2020, available-for-sale and held-to-maturity
debt securities in an unrealized loss position must be evaluated for the underlying cause of the loss. In the event that the
deterioration in value is attributable to credit related reasons, then the amount of credit-related impairment would be
recorded as a charge to our ACL with subsequent changes in the amount of impairment, up or down, also recorded through
our ACL. The exception to this process will occur if we intend to sell an impaired available-for-sale debt security or if we
will more likely than not be required to sell a credit impaired available-for-sale debt security prior to the value recovering
to the security’s amortized cost. In those situations, the entire credit-related impairment amount would be required to be
recognized in earnings. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at
December 31, 2022 and have determined that no debt securities in an unrealized loss position are arising from credit related
reasons and have therefore not recorded any allowances for debt securities in our ACL for the period. Unrealized gains
and losses related to equity securities with readily determinable fair values are included in net income.
The amortized cost and estimated fair value by type of investment security at December 31, 2022 are as follows:
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total investment securities . . . . . . . . . . . . . . . . . . . . $
3,400 $
3,400 $
Amortized
cost
Gross
unrealized
gains
Held to Maturity
Gross
unrealized
losses
(Dollars in Thousands)
— $
— $
— $
— $
Estimated
fair value
Carrying
value
3,400 $
3,400 $
3,400
3,400
Amortized
cost
Gross
unrealized
gains
Available for Sale Debt Securities
Gross
unrealized
losses
(Dollars in Thousands)
(359) $
— $
Estimated
fair value
Carrying
value(1)
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . $ 49,752 $
Residential mortgage-backed securities . . . . . . . . . .
Obligations of states and political subdivisions . . .
Total investment securities . . . . . . . . . . . . . . . . . . . . $5,018,996 $
4,805,735
163,509
3,145
927
49,393
4,209,212
159,191
4,072 $ (605,272) $4,417,796 $4,417,796
4,209,212
159,191
(599,668)
(5,245)
49,393 $
(1)
Included in the carrying value of residential mortgage- backed securities are $681,121 of mortgage-backed securities issued by Ginnie Mae and
$3,528,091 of mortgage-backed securities issued by Fannie Mae and Freddie Mac
42
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The amortized cost and estimated fair value of investment securities at December 31, 2022, by contractual
maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties.
Held to Maturity
Amortized Estimated
fair value
Cost
Available for Sale
Amortized
Cost
Estimated
fair value
(Dollars in Thousands)
49,752 $
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200 $ 1,200 $
—
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . .
163,509
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . .
4,805,735
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,400 $ 3,400 $ 5,018,996
2,200
—
—
2,200
—
—
49,393
—
159,191
4,209,212
$ 4,417,796
The amortized cost and estimated fair value by type of investment security at December 31, 2021 are as follows:
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total investment securities . . . . . . . . . . . . . . . . . . . . $
3,400 $
3,400 $
Amortized
cost
Gross
unrealized
gains
Held to Maturity
Gross
unrealized
losses
(Dollars in Thousands)
— $
— $
— $
— $
Estimated
fair value
Carrying
value
3,400 $
3,400 $
3,400
3,400
Amortized
cost
Gross
unrealized
gains
Available for Sale
Gross
unrealized
losses
(Dollars in Thousands)
Estimated
fair
value
Carrying
value(1)
(58,237) $ 4,169,363 $ 4,169,363
Residential mortgage-backed securities . . . . . . . . . . $4,213,441 $
Obligations of states and political subdivisions . . .
44,557
44,557
41,519
Total investment securities . . . . . . . . . . . . . . . . . . . . $4,254,960 $ 17,197 $ (58,237) $4,213,920 $4,213,920
14,159 $
3,038
—
(1)
Included in the carrying value of residential mortgage- backed securities are $824,474 of mortgage-backed securities issued by Ginnie Mae,
$3,344,889 of mortgage-backed securities issued by Fannie Mae and Freddie Mac
Residential mortgage-backed securities are securities issued by Freddie Mac, Fannie Mae, Ginnie Mae or
non-government entities. Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed
by the U.S. government. Investments in mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully
guaranteed by the U.S. government; however, we believe that the quality of the bonds is similar to other AAA rated bonds
with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the
federal government in early September 2008 and because securities issued by others that are collateralized by residential
mortgage-backed securities issued by Fannie Mae and Freddie Mac are rated consistently as AAA rated securities.
The amortized cost and fair value of available for sale investment securities pledged to qualify for fiduciary
powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was
$1,562,832,000 and $1,323,081,000, respectively, at December 31, 2022.
Proceeds from the sale and call of securities available-for-sale were $800,000, $5,890,000 and $42,350,000
during 2022, 2021 and 2020, respectively, which amounts included $0, $0 and $0 of mortgage-backed securities. Gross
gains of $0, $0 and $1,000, and gross losses of $0, $16,000 and $6,000 were realized on the sales and calls in 2022, 2021
and 2020, respectively.
43
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, at
December 31, 2022 were as follows:
Available for sale:
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Unrealized
Fair Value
Losses
(Dollars in Thousands)
Fair Value
Unrealized
Losses
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . $
Residential mortgage-backed securities . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . . .
49,394 $
1,357,905
118,772
$ 1,526,071
(359) $
—
2,566,975
—
$ (93,419) $ 2,566,975
(87,815)
(5,245)
$
$
—
(511,853)
—
49,394
3,924,880
118,772
$ (511,853) $ 4,093,046
$
(359)
(599,668)
(5,245)
$ (605,272)
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous loss position, at December 31,
2021 were as follows:
Less than
12 months
12 months or more
Fair Value
Unrealized
Losses
Unrealized
Losses
Fair Value
(Dollars in Thousands)
Total
U
nrealized
Losses
Fair Value
Available for sale:
Residential mortgage-backed securities . . . . . . . . . . . . . . .
$ 3,037,188
$ 3,037,188
$ (53,060)
$ (53,060)
$ 423,733
$ 423,733
$
$
(5,177)
(5,177)
$ 3,460,921
$ 3,460,921
$
$
(58,237)
(58,237)
The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes
in market interest rates. We have no intent to sell and more likely than not be required to sell before a market price recovery
or maturity of the securities; therefore, it is our conclusion that the investments in residential mortgage-backed securities
issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired.
Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds.
At December 31, 2022 and December 31, 2021, the balance in equity securities with readily determinable fair values
recorded at fair value were $5,358,000 and $6,079,000, respectively. The following is a summary of unrealized and
realized gains and losses recognized in net income on equity securities for the twelve months ended December 31, 2022,
2021 and 2020:
Net losses recognized during the period on equity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Less: Net gains and (losses) recognized during the period on equity securities sold
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(721)
—
Unrealized losses recognized during the reporting period on equity securities still held
at the reporting date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(721)
Year Ended
December 31, 2022
(Dollars in Thousands)
44
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Year Ended
December 31, 2021
(Dollars in Thousands)
Net losses recognized during the period on equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Net gains and (losses) recognized during the period on equity securities sold
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(123)
—
Unrealized losses recognized during the reporting period on equity securities still held
at the reporting date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(123)
Net gains recognized during the period on equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Less: Net gains and (losses) recognized during the period on equity securities sold
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses recognized during the reporting period on equity securities still held
at the reporting date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Year Ended
December 31, 2020
(Dollars in Thousands)
107
—
107
Other investments include equity and merchant banking investments held by our subsidiary banks and non-
banking entities. We hold ownership interests in limited partnerships for the purpose of investing in low-income housing
tax credit (“LIHTC”) projects. The partnerships may acquire, construct or rehabilitate housing for low- and moderate-
income individuals. We realize a return primarily from federal tax credits and other federal tax deductions associated with
the underlying projects. We are a limited partner in the partnerships, and not required to consolidate the entities in our
consolidated financial statements. Investments in LIHTC projects totaled $214,549,000 at December 31, 2022 and
$179,543,000 at December 31, 2021 and are included in other investments on the consolidated financial statements.
Unfunded commitments to LIHTC projects totaled $41,191,000 at December 31, 2022 and $40,094,000 at December 31,
2021 and are included in other liabilities on the consolidated financial statements.
(3) Loans
A summary of loans, by loan type at December 31, 2022 and 2021 is as follows:
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
4,373,373 $
865,994
1,989,669
41,592
159,975
7,430,603 $
4,497,444
867,831
1,668,113
40,966
134,797
7,209,151
December 31,
2022
December 31,
2021
(Dollars in Thousands)
(4) Allowance for Credit Losses
We adopted the provisions of ASU 2016-13 on January 1, 2020 on a modified retrospective basis. Results and
information regarding our ACL included in this Note are calculated and presented in accordance with that accounting
standards update. Results and information prior to January 1, 2020 are calculated and presented in accordance with
previously applicable U.S. GAAP.
45
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
ASU 2016-13 replaces the long-standing incurred loss model with an expected credit loss model that recognizes
credit losses over the life of a financial asset. Expected credit losses capture historical information, current conditions, and
reasonable and supportable forecasts of future conditions. The ACL is deducted from the amortized cost of an instrument
to present the net amount expected to be collected on the financial asset. Our ACL primarily consists of the aggregate ACL
estimates of our Subsidiary Banks. The estimates are established through charges to operations in the form of charges to
provisions for credit loss expense. Loan losses or recoveries are charged or credited directly to the ACL. The ACL of each
Subsidiary Bank is maintained at a level considered appropriate by management, based on estimated current expected
credit losses in the current loan portfolio, including information about past events, current conditions and reasonable and
supportable forecasts.
The estimation of the ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that
have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis.
The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk
characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general
loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain
sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation.
The general loan categories along with primary risk characteristics used in our calculation are as follows:
Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working
capital or equipment purchases. These loans are mostly secured by the collateral pledged by the borrower that is
directly related to the business activities of the company such as equipment, accounts receivable and inventory. The
borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory
into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured
by oil & gas production and loans secured by aircraft.
Construction and land development loans. This category includes the development of land from unimproved land to
lot development for both residential and commercial use and vertical construction across residential and commercial
real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the
price of construction materials, encounter zoning, entitlement and environmental issues, or encounter other factors
that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively
impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4
family development loans also include mortgage rate risk and the practice by the mortgage industry of more restrictive
underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and
lot inventory in the market.
Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner
occupied commercial properties, and non-owner-occupied commercial properties. Owner occupied commercial
properties include warehouses often along the border for import/export operations, office space where the borrower
is the primary tenant, restaurants and other single-tenant retail. Non-owner-occupied commercial properties include
hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry risk of repayment
when market values deteriorate, the business experiences turnover in key management, the business has an inability
to attract or keep occupancy levels stable, or when the market experiences an exit of a specific business type that is
significant to the local economy, such as a manufacturing plant.
1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases
or refinancing of existing mortgage loans. A small portion of this loan category is related to home equity lines of
credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or
underemployment and deteriorating market values of real estate.
Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts,
made to individuals. Repayment is primarily affected by unemployment or underemployment.
The loan pools are further broken down using a risk-based segmentation based on internal classifications for
commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one
46
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
segment. On a weekly basis, commercial loan past due reports are reviewed by the credit quality committee to determine
if a loan has any potential problems and if a loan should be placed on our internal Watch List report. Additionally, our
credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they
are past due and segregates any loans with potential problems for further review. The credit department will discuss the
potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the
evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the
review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch
List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.
Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring,
(iii) Special Review, (iv) Watch List—Pass, or (v) Watch List—Substandard, and (vi) Watch List—Doubtful. The loans
placed in the Special Review category and lower rated credits reflect our opinion that the loans reflect potential weakness
which require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular
basis, no less frequently than quarterly, with the credit department and the lending staff to determine if a change in category
is warranted. The loans placed in the Watch List—Pass category and lower rated credits reflect our opinion that the credit
contains weaknesses which represent a greater degree of risk, which warrant “extra attention.” Credits in this category are
reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in
category is warranted. The loans placed in the Watch List—Substandard category are considered to be potentially
inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral.
These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to
adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and
interest. Furthermore, there is the possibility that we may sustain some future loss if such weaknesses are not corrected.
The loans placed in the Watch List—Doubtful category have shown defined weaknesses and it is likely, based on current
information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Watch
List—Doubtful loans are placed on non-accrual when they are moved to that category.
For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the
credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—
Pass credits are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For
loans that are classified as Watch List—Doubtful, management evaluates these credits in accordance with ASC 310-10,
“Receivables,” and, if deemed necessary, a specific reserve is allocated to the loan. The specific reserve allocated under
ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate;
(ii) the loan’s observable market price; or (iii) net realizable value of the fair value of the collateral if the loan is collateral
dependent. Substantially all of our loans evaluated as Watch List—Doubtful under ASC 310-10 are measured using the
fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan under
ASC 310-10 if such loan is not collateral dependent.
Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if
needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then
evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to
the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition,
(ii) volume and trends in classified loans, delinquencies, non-accruals and TDR’s, (iii) concentration risk, (iv) trends in
underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative
factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics
and geopolitical events. Should any of the factors considered by management in evaluating the adequacy of the ACL
change, our estimate could also change, which could affect the level of future credit loss expense.
We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying
and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage
rate of any unfunded commitment multiplied by the historical loss rate, plus model risk adjustment, if any, of the on-
balance sheet loan pools.
Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the
estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and
47
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our
methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable
and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate
for current expected credit losses change, our estimate of current expected credit losses could also change, which could
affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and
all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control,
including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in
interest rates and the view of regulatory authorities towards loan classifications.
A summary of the changes in the allowance for probable loan losses by loan class is as follows:
December 31, 2022
Domestic
Commercial
real estate:
other
Commercial
construction & real estate: Commercial
Foreign
Commercial development
land
farmland & real estate: Residential: Residential:
commercial multifamily
first lien
junior lien Consumer Foreign
Total
Balance at December 31, 2021 . . . .
Losses charged to allowance . . . .
Recoveries credited to allowance .
Net losses charged to allowance . .
Provision (credit) charged to
$
23,178 $
(9,050)
2,894
(6,156)
35,390 $
(2)
123
121
35,654 $
(16)
27
11
(Dollars in Thousands)
3,291 $
—
—
—
4,073 $
(160)
240
80
7,754 $
(28)
104
76
272 $
(223)
38
(185)
762 $ 110,374
(9,479)
3,426
(6,053)
—
—
—
operations . . . . . . . . . . . . . . . . .
Balance at December 31, 2022 . . . .
9,706
26,728 $
$
9,173
44,684 $
809
36,474 $
503
3,794 $
606
4,759 $
454
8,284 $
194
281 $
21,651
206
968 $ 125,972
December 31, 2021
Domestic
Commercial
real estate:
other
Commercial
construction & real estate: Commercial
Commercial development
land
farmland &
commercial multifamily
real estate: Residential: Residential:
first lien
junior lien Consumer
Foreign
Foreign
Total
Balance at December 31, 2020 . . . . . $
Losses charged to allowance . . . . .
Recoveries credited to allowance . .
Net losses charged to allowance . . .
21,908 $
(8,083)
1,943
(6,140)
37,612 $
(2)
—
(2)
30,000 $
(364)
171
(193)
Provision (credit) charged to
(Dollars in Thousands)
5,051 $
—
—
—
3,874 $
(373)
60
(313)
9,570 $
(25)
164
139
291 $
(176)
46
(130)
753 $ 109,059
(9,024)
2,384
(6,640)
(1)
—
(1)
operations . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021 . . . . . $
7,410
23,178 $
(2,220)
35,390 $
5,847
35,654 $
(1,760)
3,291 $
512
4,073 $
(1,955)
7,754 $
111
272 $
10
7,955
762 $ 110,374
December 31, 2020
Domestic
Commercial
real estate:
other
Commercial
construction & real estate: Commercial
Commercial development
land
farmland &
commercial multifamily
real estate: Residential: Residential:
first lien
junior lien Consumer
Foreign
Foreign
Total
Balance at December 31, 2019 . . . .
Adoption of ASU 2016-13 . . . . . . .
Losses charged to allowance . . . .
Recoveries credited to allowance .
Net losses charged to allowance . .
Provision (credit) charged to
$
11,145 $
4,247
(8,936)
2,191
(6,745)
18,152 $
13,391
(19)
35
16
16,533 $
(4,292)
(55)
117
62
(Dollars in Thousands)
1,786 $
(355)
—
—
—
3,762 $
(1,580)
(160)
21
(139)
7,535 $
(429)
(124)
186
62
542 $
(225)
(280)
69
(211)
823 $ 60,278
10,347
(9,574)
2,629
(6,945)
(410)
—
10
10
operations . . . . . . . . . . . . . . . . .
Balance at December 31, 2020 . . . .
13,261
21,908 $
$
6,053
37,612 $
17,697
30,000 $
3,620
5,051 $
1,831
3,874 $
2,402
9,570 $
185
291 $
45,379
330
753 $ 109,059
48
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The allowance for credit losses is a reserve established through a provision for credit losses charged to expense,
which represents management’s best estimate of probable loan losses when evaluating loans (i) individually or
(ii) collectively. The credit loss expense charged to operations for the twelve months ended December 31, 2022 has
increased from the same period of 2021 in order to provide some protection from potential losses in our loan portfolio
given the high level of uncertainty in the economy and a potential economic recession on the horizon. We have increased
the severity of some of the qualitative loss factors in certain pools of the portfolio to encompass the economic uncertainty,
resulting in an increase in the required ACL. The credit loss expense charged to operations for the twelve months ended
December 31, 2021 decreased from the same period of 2020 as economic conditions in 2021 stabilized and in some cases,
improved, impacting certain segments of our loan portfolio. The stabilization and improvement meant that the pool specific
qualitative loss factors used in the December 31, 2020 ACL calculation remained constant in the December 31, 2021 ACL
calculation, which positively impacted the calculation and resulted in a decrease in the credit loss expense for 2021.
The table below provides additional information on the balance of loans individually or collectively evaluated for
impairment and their related allowance, by loan class:
Domestic
December 31, 2022
Loans Individually
Evaluated For
Impairment
Loans Collectively
Evaluated For
Impairment
Recorded
Investment Allowance
Recorded
Investment
(Dollars in Thousands)
Allowance
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,747 $ 2,375 $ 1,468,006 $ 24,353
44,614
Commercial real estate: other construction & land development . . . .
36,474
Commercial real estate: farmland & commercial . . . . . . . . . . . . . . . .
3,794
Commercial real estate: multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . .
4,759
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,284
Residential: junior lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
281
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
968
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,969,186
2,568,025
306,384
425,647
439,958
41,592
159,975
20,483
94
117
77
312
—
—
70
—
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,830 $ 2,445 $ 7,378,773 $ 123,527
December 31, 2021
Loans Individually
Evaluated For
Impairment
Loans Collectively
Evaluated For
Impairment
Recorded
Investment Allowance
Recorded
Investment
(Dollars in Thousands)
Allowance
Domestic
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial real estate: other construction & land development . . . .
Commercial real estate: farmland & commercial . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential: junior lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
298 $
589
562
131
87
—
—
—
29 $ 1,501,554 $ 23,149
35,320
70
35,654
—
3,291
—
4,073
—
7,754
—
272
—
762
—
1,667,524
2,710,494
284,405
403,571
464,173
40,966
134,797
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,667 $
99 $ 7,207,484 $ 110,275
Loans accounted for on a non-accrual basis at December 31, 2022, 2021 and 2020 amounted to $51,648,000,
$1,921,000 and $19,822,000, respectively. The increase in non-accrual loans at December 31, 2022 is primarily
attributable to two loans that were placed on non-accrual at the end of the fourth quarter of 2022. One relationship is
49
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
secured by equipment used in the oil and gas industry and one is secured by real estate. The decrease in non-accrual loans
at December 31, 2021 compared to December 31, 2020 is primarily attributable to a relationship secured by commercial
property that was placed on non-accrual in the fourth quarter of 2020 and foreclosed upon in the first quarter of 2021. The
effect of such non-accrual loans reduced interest income by approximately $116,000, $169,000 and $694,000 for the years
ended December 31, 2022, 2021 and 2020, respectively. Amounts received on non-accruals are applied, for financial
accounting purposes, first to principal and then to interest after all principal has been collected. Accruing loans
contractually past due 90 days or more as to principal or interest payments at December 31, 2022, 2021 and 2020 amounted
to approximately $6,132,000, $8,642,000 and $8,238,000, respectively.
The table below provides additional information on loans accounted for on a non-accrual basis by loan class:
Domestic
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial real estate: other construction & land development . . . . . . . . . . . . . .
Commercial real estate: farmland & commercial . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-accrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30,747 $
20,483
94
117
207
51,648 $
298
589
562
131
341
1,921
December 31, 2022 December 31, 2021
(Dollars in Thousands)
Doubtful loans are those loans where it is probable that all amounts due according to contractual terms of the loan
agreement will not be collected. We have identified these loans through our normal loan review procedures. Doubtful
loans are measured based on (i) the present value of expected future cash flows discounted at the loan’s effective interest
rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent.
Substantially all of our doubtful loans are measured at the fair value of the collateral. In limited cases, we may use other
methods to determine the level of impairment of a loan if such loan is not collateral dependent.
The following table details loans accounted for as “troubled debt restructuring,” segregated by loan class. Loans
accounted for as troubled debt restructuring are included in impaired loans.
Domestic
Residential: first lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Residential: junior lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total troubled debt restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,642 $
714
802
55
3,213 $
2,254
105
878
16
3,253
December 31, 2022 December 31, 2021
(Dollars in Thousands)
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well
as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial and industrial or real estate
loans are generally considered by management to represent a loss, in whole or part, when an exposure beyond any collateral
coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial
condition and general economic conditions in the borrower’s industry. Generally, unsecured consumer loans are charged-
off when 90 days past due.
While management considers that it is generally able to identify borrowers with financial problems reasonably
early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses. The
determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an
exercise of judgment. Similarly, the determination of the adequacy of the ACL (formerly allowance for probable loan
50
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
losses) can be made only on a subjective basis. It is the judgment of our management that the ACL at December 31, 2022
and December 31, 2021, was adequate to absorb expected losses from loans in the portfolio at that date.
The following table presents information regarding the aging of past due loans by loan class:
30 - 59
Days
60 - 89
Days
90 Days or
Greater
December 31, 2022
90 Days or
greater &
still accruing
(Dollars in Thousands)
Total
Past
Due
Current
Total
Portfolio
Domestic
Commercial. . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: other construction
$
1,732 $
258 $
1,014 $
59 $
3,004 $ 1,495,750 $ 1,498,754
& land development . . . . . . . . . . . . . . . . .
1,130
—
—
—
1,130
1,988,539
1,989,669
Commercial real estate: farmland &
commercial . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . .
Residential: junior lien . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total past due loans . . . . . . . . . . . . . . . . .
1,744
—
2,023
925
281
717
$
8,552 $
117
—
1,068
771
14
23
2,251 $
—
—
4,189
1,717
7
288
—
—
4,061
1,717
7
288
7,215 $
6,132 $
1,861
—
7,280
3,413
302
1,028
2,568,118
2,566,257
306,501
306,501
425,724
418,444
440,270
436,857
41,592
41,290
159,975
158,947
18,018 $ 7,412,585 $ 7,430,603
Domestic
Commercial. . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: other construction
30 - 59
Days
60 - 89
Days
December 31, 2021
90 Days or
greater &
still accruing
90 Days or
Greater
Total
Past
Due
(Dollars in Thousands)
Current
Total
Portfolio
$
2,534 $
303 $
577 $
577 $
3,414 $ 1,498,438 $ 1,501,852
& land development . . . . . . . . . . . . . . . . .
499
334
188
188
1,021
1,667,092
1,668,113
Commercial real estate: farmland &
commercial . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: multifamily. . . . . . .
Residential: first lien . . . . . . . . . . . . . . . . . .
Residential: junior lien . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total past due loans . . . . . . . . . . . . . . . . .
18,164
—
2,342
747
231
1,319
172
—
1,212
115
88
232
$
25,836 $
2,456 $
644
—
5,129
1,055
4
1,574
9,171 $
307
—
4,937
1,055
4
1,574
8,642 $
18,980
—
8,683
1,917
323
3,125
2,711,056
2,692,076
284,536
284,536
403,658
394,975
464,173
462,256
40,966
40,643
134,797
131,672
37,463 $ 7,171,688 $ 7,209,151
The decrease in commercial real estate: farmland and commercial loans past due 30 – 59 days is primarily
attributable to a relationship secured by real estate that was not past due in 2022. Our internal classified report is segregated
into the following categories: (i) “Special Review Credits,” (ii) “Watch List—Pass Credits,” or (iii) “Watch List—
Substandard Credits.” The loans placed in the “Special Review Credits” category reflect our opinion that the loans reflect
potential weakness which require monitoring on a more frequent basis. The “Special Review Credits” are reviewed and
discussed on a regular basis with the credit department and the lending staff to determine if a change in category is
warranted. The loans placed in the “Watch List—Pass Credits” category reflect our opinion that the credit contains
weaknesses which represent a greater degree of risk, which warrant “extra attention.” The “Watch List—Pass Credits” are
reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in
category is warranted. The loans placed in the “Watch List—Substandard Credits” classification are considered to be
potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged
collateral. These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses
related to adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of
principal and interest. Furthermore, there is the possibility that we could sustain some future loss if such weaknesses are
not corrected.
51
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of the loan portfolio by credit quality indicator by loan class is as follows:
2022
2021
2020
2019
(Dollars in Thousands)
2018
Prior
Total
Balance at December 31, 2022
Domestic
Commercial
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial. . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate: other construction &
land development
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial real estate: other
$ 736,462
377
161
29,789
$ 766,789
$ 524,879
213
149
—
$ 525,241
$ 96,401
—
143
954
$ 97,498
$ 35,917
—
—
—
$ 35,917
$ 43,792
—
49
—
$ 43,841
$ 29,464
—
—
4
$ 29,468
$ 1,466,915
590
502
30,747
$ 1,498,754
$ 913,675
—
19,982
$ 666,347
—
407
$ 173,824
—
94
$ 174,897
209
—
$ 35,069
—
—
$
5,165
—
—
$ 1,968,977
209
20,483
construction & land development . . . . . . . . .
$ 933,657
$ 666,754
$ 173,918
$ 175,106
$ 35,069
$
5,165
$ 1,989,669
Commercial real estate: farmland &
commercial
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Pass. . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial real estate: farmland &
$ 811,117
2,855
17,060
2,275
94
$ 584,134
—
247
—
—
$ 456,200
842
—
54,152
—
$ 232,537
—
—
96
—
$ 325,214
—
—
—
—
$ 81,295
—
—
—
—
$ 2,490,497
3,697
17,307
56,523
94
commercial . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 833,401
$ 584,381
$ 511,194
$ 232,633
$ 325,214
$ 81,295
$ 2,568,118
Commercial real estate: multifamily
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
$ 127,680
117
Total Commercial real estate: multifamily . . . . . $ 127,797
Residential: first lien
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Residential: first lien . . . . . . . . . . . . . . . .
Residential: junior lien
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Watch List- Doubtful . . . . . . . . . . . . . . . . . . .
Total Residential: junior lien. . . . . . . . . . . . . . .
Residential: junior lien
Consumer
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Consumer . . . . . . . . . . . . . . . . . . . . . . . .
Foreign
$
$
$
$
87,469
—
87,469
$ 59,035
—
$ 59,035
$ 12,026
—
$ 12,026
$
$
5,490
—
5,490
$ 14,684
—
$ 14,684
$ 306,384
117
$ 306,501
82,466
360
—
82,826
$ 49,591
—
—
$ 49,591
$ 40,985
—
—
$ 40,985
$ 33,814
—
—
$ 33,814
$ 79,660
—
—
$ 79,660
$ 425,287
360
77
$ 425,724
$ 138,771
—
77
$ 138,848
$
$
$
$
92,256 $ 108,815
312
92,256 $ 109,127
—
$ 91,130
—
$ 91,130
$ 41,273
—
$ 41,273
$ 21,975
—
$ 21,975
$ 84,509
—
$ 84,509
$ 439,958
312
$ 440,270
31,962 $
31,962 $
6,603 $
6,603 $
897 $
897 $
489 $
489 $
28 $
28 $
1,613 $
1,613 $
41,592
41,592
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 124,265
$ 124,265
$ 3,048,975
19,082
$
$
19,082
$ 2,081,483
5,362
$
$
5,362
$ 988,625
4,848
$
$
4,848
$ 543,277
3,417
$
$
3,417
$ 468,848
3,001
$
$
3,001
$ 299,395
$ 159,975
$ 159,975
$ 7,430,603
52
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2021
2020
2019
2018
(Dollars in Thousands)
2017
Balance at December 31, 2021
Domestic
Commercial
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Pass. . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial. . . . . . . . . . . . . . . . . . . . . . .
Commercial
Commercial real estate: other construction &
land development
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Pass. . . . . . . . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial real estate: other
$ 1,041,763
74,559
33,920
3,581
224
$ 1,154,047
$ 167,691
497
—
273
—
$ 168,461
$ 77,579
139
—
716
—
$ 78,434
$ 58,439
81
—
57
—
$ 58,577
$ 37,104
—
—
—
74
$ 37,178
$ 966,946
—
—
485
$ 312,389
—
23,100
104
$ 308,673
211
—
—
$ 37,124
—
—
—
$ 16,642
—
—
—
Prior
Total
$
$
$
5,144
—
10
1
—
5,155
$ 1,387,720
75,276
33,930
4,628
298
$ 1,501,852
2,439
—
—
—
$ 1,644,213
211
23,100
589
construction & land development . . . . . . . . .
$ 967,431
$ 335,593
$ 308,884
$ 37,124
$ 16,642
$
2,439
$ 1,668,113
Commercial real estate: farmland &
commercial
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Review . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Pass. . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial real estate: farmland &
$ 1,001,335
929
18,790
—
—
$ 680,777
1,292
44,059
54,097
224
$ 288,333
—
—
3,899
337
$ 417,353
3,448
—
—
—
$ 96,096
61
94
2,355
—
$ 97,119
—
1
456
1
$ 2,581,013
5,730
62,944
60,807
562
commercial . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,021,054
$ 780,449
$ 292,569
$ 420,801
$ 98,606
$ 97,577
$ 2,711,056
Commercial real estate: multifamily
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Commercial real estate: multifamily . . . . .
Residential: first lien
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Watch List - Substandard. . . . . . . . . . . . . . . .
Watch List - Doubtful . . . . . . . . . . . . . . . . . .
Total Residential: first lien . . . . . . . . . . . . . . . .
Residential: junior lien
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Residential: junior lien. . . . . . . . . . . . . . .
Consumer
$ 133,152
—
$ 133,152
$ 128,742
56
—
$ 128,798
$
$
$
$
40,766
131
40,897
$ 78,609
—
$ 78,609
$ 10,632
—
$ 10,632
$ 14,217
—
$ 14,217
$
$
7,029
—
7,029
$ 284,405
131
$ 284,536
52,725
—
87
52,812
$ 57,249
103
—
$ 57,352
$ 49,259
—
—
$ 49,259
$ 29,477
122
—
$ 29,599
$ 85,838
—
—
$ 85,838
$ 403,290
281
87
$ 403,658
$ 130,629
$ 130,629
$ 123,062
$ 123,062
$ 59,113
$ 59,113
$ 30,603
$ 30,603
$ 40,855
$ 40,855
$ 79,911
$ 79,911
$ 464,173
$ 464,173
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Consumer . . . . . . . . . . . . . . . . . . . . . . . .
$
$
32,053 $
32,053
$
5,693
5,693
$
$
1,370 $
1,370 $
189 $
189 $
9 $
9 $
1,652 $
1,652 $
40,966
40,966
Foreign
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,811
$
$
74,811
$ 3,641,975
33,360
$
$
33,360
$ 1,540,327
9,223 $
9,223 $
$
$
$ 885,554
8,852 $
8,852 $
4,790 $
4,790 $
$ 616,037
$ 241,896
3,761 $ 134,797
3,761 $ 134,797
$ 7,209,151
$ 283,362
The decrease in Commercial loans in the Special Review category is primarily attributable to the upgrade of a
relationship secured by oil and gas properties to Pass. The decrease in the Commercial Watch List – Pass category is
primarily attributable to the downgrade of a relationship secured by equipment used in the oil and gas industry to Watch-
List Doubtful and a relationship secured by inventory, which was paid off in 2022. The decrease in Commercial Real
Estate: Other Construction and Land Development loans in the Watch List – Pass category is primarily attributable to the
downgrade of a loan secured by real estate to Watch List – Doubtful. The decrease in Commercial Real Estate: Farmland &
Commercial Watch List – Pass category is primarily attributable to a relationship secured by real estate that was paid off
in 2022.
53
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(5) Bank Premises and Equipment
A summary of bank premises and equipment, by asset classification, at December 31, 2022 and 2021 were as
follows:
Bank buildings and improvements. . . . . . . . . . . . . . . . . . . . . .
Furniture, equipment and vehicles . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .
Bank premises and equipment, net . . . . . . . . . . . . . . . . . .
(6) Goodwill and Other Intangible Assets
Estimated
useful lives
5
1
-
-
39
20
years
years
$
$
2022
2021
$
(Dollars in Thousands)
571,665
307,990
108,622
(556,665)
431,612
573,276
302,847
113,118
(542,159)
447,082
$
The majority of our identified intangibles are in the form of amortizable core deposit premium. A small portion
of the fully amortized identified intangibles represent identified intangibles in the acquisition of the rights to the insurance
agency contracts of InsCorp, Inc., acquired in 2008. Information on our identified intangible assets follows:
December 31, 2022:
Core deposit premium . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible (contract rights) . . . . . . . . . . . . . . . .
Total identified intangibles . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2021:
Core deposit premium . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible (contract rights) . . . . . . . . . . . . . . . .
Total identified intangibles . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Carrying
Amount
Accumulated
Amortization
(Dollars in Thousands)
Net
58,675
2,022
60,697
58,675
2,022
60,697
$
$
$
$
58,675 $
2,022
60,697 $
58,675 $
2,022
60,697 $
—
—
—
—
—
—
Amortization expense of intangible assets was $0, $0 and $0 for the years ended December 31, 2022, 2021 and
2020.
There were no changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021.
54
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(7) Deposits
Deposits as of December 31, 2022 and 2021 and related interest expense for the years ended December 31, 2022,
2021 and 2020 were as follows:
2022
2021
(Dollars in Thousands)
Deposits:
Demand - non-interest bearing
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,744,299 $ 4,805,999
1,032,527
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total demand non-interest bearing . . . . . . . . . . . . . . . . . . . . . . .
5,838,526
Savings and interest-bearing demand
1,101,756
5,846,055
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total savings and interest-bearing demand . . . . . . . . . . . . . . . .
Time, certificates of deposit $100,000 or more
3,448,717
1,297,051
4,745,768
3,555,279
1,035,269
4,590,548
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
652,073
892,619
794,757
866,160
Less than $100,000
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total time, certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . .
276,660
246,832
2,068,184
286,499
241,387
2,188,803
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,660,007 $12,617,877
2022
2021
(Dollars in Thousands)
2020
Interest expense:
Savings and interest-bearing demand
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total savings and interest-bearing demand . . . . .
Time, certificates of deposit $100,000 or more
$
9,196
3,490
12,686
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,528
3,867
$
3,268
842
4,110
6,652
3,452
5,098
1,260
6,358
8,827
7,536
Less than $100,000
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total time, certificates of deposit . . . . . . . . . . . . .
1,027
735
11,157
Total interest expense on deposits . . . . . . . . . . . . . . . $ 23,843
$
984
567
11,655
15,765
$
1,781
1,086
19,230
25,588
55
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Scheduled maturities of time deposits as of December 31, 2022 were as follows:
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,922,183
113,090
19,939
11,575
1,390
7
2,068,184
Total
(Dollars in thousands)
Scheduled maturities of time deposits in amounts of $100,000 or more at December 31, 2022, were as follows:
Due within 3 months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after 3 months and within 6 months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 6 months and within 12 months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total
(Dollars in thousands)
692,708
341,445
411,772
98,767
1,544,692
Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2022 and December 31,
2021 were $1,004,870,000 and $1,125,318,000, respectively.
(8) Securities Sold Under Repurchase Agreements
Our Subsidiary Banks have entered into repurchase agreements with individual customers of the Subsidiary
Banks. The purchasers have agreed to resell to the Subsidiary Banks identical securities upon the maturities of the
agreements. Securities sold under repurchase agreements were mortgage-backed securities and averaged $476,877,000
and $411,611,000 during 2022 and 2021, respectively, and the maximum amount outstanding at any month end during
2022 and 2021 was $513,368,000 and $443,980,000, respectively.
Further information related to repurchase agreements at December 31, 2022 and 2021 is set forth in the following
table:
56
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Book Value of
Securities Sold
Collateral Securities
Fair Value of
Securities Sold
Repurchase Borrowing
Balance of Weighted Average
Liability
(Dollars in Thousands)
Interest Rate
December 31, 2022 term:
Overnight agreements . . . . . . . . . . . . . . . . . . . . . . .
1 to 29 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 to 90 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 90 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 664,491
—
—
20,852
$ 685,343
$ 559,637
—
—
16,968
$ 576,605
$ 419,703
—
—
11,488
$ 431,191
December 31, 2021 term:
Overnight agreements . . . . . . . . . . . . . . . . . . . . . . .
1 to 29 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 to 90 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 90 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 500,495
—
—
11,452
$ 511,947
$ 492,026
—
—
11,229
$ 503,255
$ 428,235
—
—
11,437
$ 439,672
1.61 %
—
—
1.32
1.60 %
0.16 %
—
—
0.48
0.17 %
The book value and fair value of securities sold includes the entire book value and fair value of securities partially
or fully pledged under repurchase agreements.
(9) Other Borrowed Funds
Other borrowed funds include Federal Home Loan Bank borrowings, which may be short, and long-term fixed
borrowings issued by the Federal Home Loan Bank of Dallas and the Federal Home Loan Bank of Topeka at the market
price offered at the time of funding. These borrowings are secured by mortgage-backed investment securities and a portion
of our loan portfolio. The decrease in long-term borrowings at December 31, 2022 is a result of three non-amortizing long-
term, callable advances issued by the Federal Home Loan Bank of Dallas being called in the fourth quarter of 2022. The
advances totaled $425,000,000.
Further information regarding our other borrowed funds at December 31, 2022 and 2021 is set forth in the
following table:
Federal Home Loan Bank advances—short-term
Balance at year end . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate on balance outstanding at year end . . . . . . . . . .
Average daily balance . . . . . . . . . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum amount outstanding at any month end . . .
Federal Home Loan Bank advances—long-term(1)
Balance at year end . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate on balance outstanding at year end . . . . . . . . . .
Average daily balance . . . . . . . . . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum amount outstanding at any month end . . .
$
$
$
$
$
$
December 31,
2022
2021
(Dollars in Thousands)
—
— %
—
— %
—
$
$
$
—
— %
—
— %
—
10,944
$
436,138
2.61 %
386,924
1.75 %
436,122
$
$
1.73 %
436,225
1.71 %
436,311
(1) Long-term advances at December 31, 2022 and December 31, 2021 consisted of both amortizing and non-amortizing advances. The non-
amortizing advances totaling $425,000,000 were called by the Federal Home Loan bank in the fourth quarter of 2022. Two amortizing advances
are outstanding at December 31, 2021 in the amounts of $2,974,000 and $7,969,000 and mature in December 2033 and November 2033,
respectively. The amortization on the amortizing long-term advances totals approximately $199,000, $204,000, $210,000, $215,000 and $221,000
for the years ending December 31, 2023, 2024, 2025, 2026 and December 31, 2027, respectively.
57
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(10) Junior Subordinated Deferrable Interest Debentures
We have formed five statutory business trusts under the laws of the State of Delaware for the purpose of issuing
trust preferred securities. These statutory business trusts (the “Trusts”) have each issued Capital and Common Securities
and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) we issued.
As of December 31, 2022 and December 31, 2021, the principal amount of debentures outstanding totaled $134,642,000.
The Debentures are subordinated and junior in right of payment to all our present and future senior indebtedness
(as defined in the respective indentures) and are pari passu with one another. The interest rate payable on, and the payment
terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and
Common Securities issued by the Trusts. We have fully and unconditionally guaranteed the obligations of each of the
Trusts with respect to the Capital and Common Securities. We have the right, unless an Event of Default (as defined in the
Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to twenty consecutive
quarterly periods on Trusts VIII, IX, X, XI and XII. If interest payments on any of the Debentures are deferred, distributions
on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to
maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.
For financial reporting purposes, the Trusts are treated as investments and not consolidated in the consolidated
financial statements. Although the Capital Securities issued by each of the Trusts are not included as a component of
shareholders’ equity on the consolidated statement of condition, the Capital Securities are treated as capital for regulatory
purposes. Specifically, under applicable regulatory guidelines, the Capital Securities issued by the Trusts qualify as Tier 1
capital up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold
would qualify as Tier 2 capital. At December 31, 2022 and December 31, 2021, the total $134,642,000 of the Capital
Securities outstanding qualified as Tier 1 capital.
The following table illustrates key information about each of the Debentures and their interest rates at
December 31, 2022:
Junior
Subordinated
Deferrable
Interest
Debentures
Repricing
Frequency
Interest
Rate
Interest
Rate Index(1)
Trust VIII . . . . . . . . . . . . . .
Trust IX . . . . . . . . . . . . . . .
Trust X . . . . . . . . . . . . . . . .
Trust XI . . . . . . . . . . . . . . .
Trust XII. . . . . . . . . . . . . . .
$
$
25,774
41,238
21,021
25,990
20,619
134,642
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
(Dollars in Thousands)
3.05
1.62
1.65
1.62
1.45
7.13 % LIBOR +
5.36 % LIBOR +
6.09 % LIBOR +
5.36 % LIBOR +
6.21 % LIBOR +
Maturity Date
October 2033
October 2036
February 2037
July 2037
September 2037
Optional
Redemption Date(1)
October 2008
October 2011
February 2012
July 2012
September 2012
(1) The Capital Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.
(11) Earnings per Share (“EPS”)
Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding.
The computation of diluted EPS assumes the issuance of common shares for all dilutive potential common shares
58
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
outstanding during the reporting period. The calculation of the basic EPS and the diluted EPS for the years ended
December 31, 2022, 2021, and 2020 is set forth in the following table:
Net Income
(Numerator)
Shares
(Denominator)
(Dollars in Thousands,
Except Per Share Amounts)
Per Share
Amount
December 31, 2022:
Basic EPS
Net income available to common
Potential dilutive common shares . . . . . . . . .
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,232
—
Diluted EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,232
December 31, 2021:
Basic EPS
Net income available to common
Potential dilutive common shares. . . . . . . . . .
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,922
—
Diluted EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,922
December 31, 2020:
Basic EPS
Net income available to common
62,658,414
151,820
62,810,234
63,352,737
133,629
63,486,366
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,319
—
Diluted EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,319
Potential dilutive common shares. . . . . . . . . .
63,725,819
127,316
63,853,135
$
$
$
$
$
$
4.79
4.78
4.01
4.00
2.63
2.62
(12) Employees’ Profit-Sharing Plan
We have a deferred profit-sharing plan for full-time employees with a minimum of one year of continuous
employment. Our annual contribution to the plan is based on a percentage, as determined by our Board of Directors, of
income before income taxes, as defined, for the year. Allocation of the contribution among officers and employees’
accounts is based on length of service and amount of salary earned. Profit sharing costs of $4,300,000, $3,550,000 and
$4,000,000 were charged to income for the years ended December 31, 2022, 2021, and 2020, respectively.
(13) International Operations
We provide international banking services for our customers through our Subsidiary Banks. Neither we nor our
Subsidiary Banks have facilities located outside the United States. International operations are distinguished from domestic
operations based upon the domicile of the customer.
Because the resources we employ are common to both international and domestic operations, it is not practical to
determine net income generated exclusively from international activities.
59
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of assets attributable to international operations at December 31, 2022 and 2021 are as follows:
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Less allowance for probable loan losses. . . . . . . . . . .
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . .
$
$
2022
2021
(Dollars in Thousands)
$
103,748
56,227
159,975
(968)
159,007
$
515 $
91,861
42,936
134,797
(762)
134,035
605
At December 31, 2022 and December 31, 2021, we had $131,254,000 and $111,955,000, respectively, in
outstanding standby and commercial letters of credit to facilitate trade activities.
Revenues directly attributable to international operations were approximately $4,821,000, $4,090,000 and
$4,676,000 for the years ended December 31, 2022, 2021 and 2020, respectively.
(14) Income Taxes
We file a consolidated U.S. Federal and State income tax return. The current and deferred portions of net income
tax expense included in the consolidated statements of income are presented below for the years ended December 31:
2022
2021
2020
(Dollars in Thousands)
Current
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . $
State. . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . .
Total current taxes . . . . . . . . . . . .
Deferred
U.S. . . . . . . . . . . . . . . . . . . . . . . . . .
State. . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred taxes . . . . . . . . . . .
Total income taxes. . . . . . . . . . . .
$
66,670 $
5,118
—
71,788
10,555
64
10,619
82,407
$
59,591 $
5,272
—
64,863
3,794
(252)
3,542
68,405
$
43,794
3,709
58
47,561
(2,733)
(389)
(3,122)
44,439
60
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Total income tax expense differs from the amount computed by applying the U.S. Federal income tax rate of 21%
for 2022, 2021 and 2020 to income before income taxes. The reasons for the differences for the years ended December 31
are as follows:
2022
2021
2020
Computed expected tax expense . . . .
Change in taxes resulting from:
$
80,893
(Dollars in Thousands)
$
68,011
$
Tax-exempt interest income . . . . .
State tax, net of federal income
taxes, tax credit and refunds . . . .
Other investment income. . . . . . . .
Net investment in low-income
housing investments . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Actual tax expense. . . . . . . . . . . .
(2,433)
4,094
(1,391)
1,906
(662)
$
82,407
$
(2,970)
3,966
(1,753)
203
948
68,405
$
45,218
(2,709)
2,622
(2,205)
1,990
(477)
44,439
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 2022 and 2021 are reflected below:
Deferred tax assets:
Loans receivable, principally due to the allowance for probable
loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on available for sale investment securities. . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Bank premises and equipment, principally due to differences on
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges on available-for-sale securities . . . . . . . . . . . . . . . .
Identified intangible assets and goodwill . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022
2021
(Dollars in Thousands)
25,982 $
1,194
186
130,586
5,000
162,948
(13,615)
(19)
(14,125)
(36,566)
(64,325)
98,623 $
22,773
1,227
81
9,062
4,842
37,985
(12,163)
(19)
(13,966)
(24,235)
(50,383)
(12,398)
The net deferred tax asset of $98,623,000 at December 31, 2022 is included in other assets in the consolidated
statements of condition. The net deferred tax liability of $12,398,000 at December 31, 2021 is included in other liabilities
in the consolidated statements of condition.
(15) Stock Options and Stock Appreciation Rights
On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option
Plan (the “2012 Plan”). There are 800,000 shares available for stock option grants under the 2012 Plan. Under the 2012
Plan, both qualified incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”) may be granted. Options
granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10%
shareholders, which may be exercisable for a period of up to only five years. On April 4, 2022, the 2012 Plan expired and
was not renewed.
61
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The fair value of each option award granted under the plan is estimated on the date of grant using a
Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. Expected volatility
is based on the historical volatility of the price of our stock. We use historical data to estimate the expected dividend yield
and employee termination rates within the valuation model. The expected term of options is derived from historical
exercise behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield
curve in effect at the time of grant.
Expected Life (Years). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
2021
7.00
3.08 %
1.94 %
37.78 %
7.00
3.18 %
1.02 %
37.84 %
A summary of option activity under the stock option plans for the twelve months ended December 31, 2022 is as
follows:
Weighted
average
exercise
price
Weighted
average
remaining
contractual
term (years)
Number of
options
Aggregate
intrinsic
value ($)
(Dollars in Thousands)
Options outstanding at December 31, 2021 . . . . . . . . . . . . . . . . . .
Plus: Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2022 . . . . . . . . . . . . . . . . . .
520,551
31,150
$ 28.28
38.92
69,479
—
20,400
461,822
22.14
—
33.99
29.67
4.07 $
Options fully vested and exercisable at December 31, 2022 . . . .
258,215 $ 25.26
2.26 $
7,430
5,293
Stock-based compensation expense included in the consolidated statements of income for the years ended
December 31, 2022, 2021 and 2020 was approximately $449,000, $506,000 and $743,000, respectively. As of
December 31, 2022, there was approximately $762,000 of total unrecognized stock-based compensation cost related to
non-vested options granted under our plans that will be recognized over a weighted average period of 1.7 years.
Other information pertaining to option activity during the twelve months ended December 31, 2022, 2021 and
2020 is as follows:
Twelve Months Ended December 31,
2021
2022
2020
Weighted average grant date fair value of
stock options granted . . . . . . . . . . . . . . . . . . . . . . $
11.24 $
Total fair value of stock options vested. . . . . . . . . . $ 514,000
$ 1,670,000
Total intrinsic value of stock options exercised . . .
$ 1,308,000
$ 2,536,000
10.20 $
2.46
$ 1,218,000
$ 356,000
On April 18, 2022, the Board of Directors adopted the 2022 International Bancshares Stock Appreciation Rights
Plan (the “SAR Plan”). There are 750,000 shares of underlying common stock that may be used for stock appreciation
right (“SAR”) grants under the plan, however, no actual shares will be granted. Upon exercise, the SAR will be settled in
62
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
cash. SARs granted may be exercisable for a period of up to 10 years from the date of grant and may vest over an eight-
year period. As of December 31, 2022, a total of 502,250 SARS had been issued under the SAR Plan.
A summary of activity under the SAR Plan for the twelve months ended December 31, 2022 is as follows:
Weighted
average
stock appreciation exercise
Number of
rights
price
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic
value ($)
(Dollars in Thousands)
Stock appreciation rights outstanding at December 31,
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: Stock appreciation rights granted . . . . . . . . . . . . . . . .
Less:
Stock appreciation rights exercised. . . . . . . . . . . . . . . . .
Stock appreciation rights expired . . . . . . . . . . . . . . . . . .
Stock appreciation rights forfeited . . . . . . . . . . . . . . . . .
Stock appreciation rights outstanding at December 31,
— $ —
39.95
502,250
—
—
13,000
—
—
39.33
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
489,250
39.35
9.50 $
3,136
Stock appreciation rights fully vested and exercisable at
December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ —
The fair value of the liability for payments due to stock appreciation rights holders at December 31, 2022 is
approximately $546,000, as calculated using a Black-Sholes Merton model, and is included in other liabilities on the
consolidated statements of condition. The expense recorded in connection with all grants under the SAR Plan totaled
$546,000 for the twelve months ended December 31, 2022.
(16) Commitments, Contingent Liabilities and Other Matters
On March 15, 2020, the FRB announced that it had reduced regulatory reserve requirements to zero percent
effective on March 26, 2020; therefore no cash is required to be maintained to satisfy regulatory reserve requirements.
We are involved in various legal proceedings that are in various stages of litigation. We have determined, based
on discussions with our counsel that any material loss in such actions, individually or in the aggregate, is remote or the
damages sought, even if fully recovered, would not be considered material to our consolidated statements of condition and
related statements of income, comprehensive income, shareholders’ equity and cash flows. However, many of these
matters are in various stages of proceedings and further developments could cause management to revise its assessment of
these matters.
(17) Transactions with Related Parties
In the ordinary course of business, the Subsidiary Banks make loans to our directors and executive officers,
including their affiliates, families and companies in which they are principal owners. In the opinion of management, these
loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than normal risk of collectability or present other
unfavorable features. The aggregate amounts receivable from such related parties amounted to approximately $28,708,000
and $18,881,000 at December 31, 2022 and 2021, respectively.
(18) Financial Instruments with Off-Statement of Condition Risk and Concentrations of Credit Risk
In the normal course of business, the Subsidiary Banks are party to financial instruments with off-statement of
condition risk to meet the financing needs of their customers. These financial instruments include commitments to their
63
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
customers. These financial instruments involve, to varying degrees, elements of credit risk in excess of the amounts
recognized in the consolidated statement of condition. The contract amounts of these instruments reflect the extent of
involvement the Subsidiary Banks have in particular classes of financial instruments. At December 31, 2022, the following
financial amounts of instruments, whose contract amounts represent credit risks, were outstanding:
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit card lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,056,718,000
14,747,000
129,411,000
1,843,000
We enter into a standby letter of credit to guarantee performance of a customer to a third party. These guarantees
are primarily issued to support public and private borrowing arrangements. The credit risk involved is represented by the
contractual amounts of those instruments. Under the standby letters of credit, we are required to make payments to the
beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met. At
December 31, 2022, the maximum potential amount of future payments is approximately $129,411,000. At December 31,
2022, the fair value of these guarantees is not significant. Unsecured letters of credit totaled approximately $40,249,000
and $29,254,000 at December 31, 2022 and 2021, respectively.
We enter into commercial letters of credit on behalf of our customers which authorize a third party to draw drafts
upon us up to a stipulated amount and with specific terms and conditions. A commercial letter of credit is a conditional
commitment on our part to provide payment on drafts drawn in accordance with the terms of the commercial letter of
credit.
The Subsidiary Banks’ exposure to credit loss in the event of nonperformance by the other party to the above
financial instruments is represented by the contractual amounts of the instruments. The Subsidiary Banks use the same
credit policies in making commitments and conditional obligations as they do for on-statement of condition instruments.
The Subsidiary Banks control the credit risk of these transactions through credit approvals, limits and monitoring
procedures. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates normally less than one year or
other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The
Subsidiary Banks evaluate each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Subsidiary Banks upon extension of credit, is based on management’s credit evaluation of the
customer. Collateral held varies, but may include residential and commercial real estate, bank certificates of deposit,
accounts receivable and inventory.
The Subsidiary Banks make commercial, real estate and consumer loans to customers principally located in South,
Central and Southeast Texas and the State of Oklahoma. Although the loan portfolio is diversified, a substantial portion
of its debtors’ ability to honor their contracts is dependent upon the economic conditions in these areas, especially in the
real estate and commercial business sectors.
(19) Capital Requirements
Bank regulatory agencies limit the amount of dividends, which the Subsidiary Banks can pay, without obtaining
prior approval from such agencies. At December 31, 2022, the Subsidiary Banks could pay dividends of up to
$961,000,000 without prior regulatory approval and without adversely affecting their “well-capitalized” status under
regulatory capital rules in effect at December 31, 2022. In addition to legal requirements, regulatory authorities also
consider the adequacy of the Subsidiary Banks’ total capital in relation to their deposits and other factors. These capital
adequacy considerations also limit amounts available for payment of dividends. We historically have not allowed any
Subsidiary Bank to pay dividends in such a manner as to impair its capital adequacy.
We and the Subsidiary Banks are subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional
64
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet
specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-statement of condition
items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and other factors.
Current quantitative measures established by regulation to ensure capital adequacy require us to maintain
minimum amounts and ratios (set forth in the table on the following page) of Total and Tier 1 capital to risk-weighted
assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2022, that we met all capital
adequacy requirements to which we are subject.
In July 2013, the FDIC and other regulatory bodies established a new, comprehensive capital framework for U.S.
banking organizations, consisting of minimum requirements that increase both the quantity and quality of capital held by
banking organizations. The final rules are a result of the implementation of the BASEL III capital reforms and various
Dodd-Frank related capital provisions. Consistent with the Basel international framework, the rules include a new
minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5% and a CET1 capital conservation
buffer of 2.5% of risk-weighted assets. The capital conservation buffer began phasing-in on January 1, 2016 at .625% and
increased each year until January 1, 2019, when we were required to have a 2.5% capital conservation buffer, effectively
resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The rules
also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage
ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and
implements strict eligibility criteria for regulatory capital instruments. The rules also improve the methodology for
calculating risk-weighted assets to enhance risk sensitivity. The rules were subject to a four-year phase-in period for
mandatory compliance, and we were required to begin to phase-in the new rules beginning on January 1, 2015. We believe
that as of December 31, 2022, we meet all fully phased-in capital adequacy requirements.
On November 21, 2017, the OCC, the Federal Reserve and the FDIC finalized a proposed rule that extends the
current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain
minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches
capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage
servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority
interests. The agencies are also considering whether to make adjustments to the capital rules in response to CECL (the
FASB Standard relating to current expected credit loss) and its potential impact on regulatory capital.
On December 7, 2017, the Basel Committee on Banking Supervision unveiled the latest round of its regulatory
capital framework, commonly called “Basel IV.” The framework makes changes to the capital framework first introduced
as “Basel III” in 2010. The committee targeted 2022-2027 as the timeframe for implementation by regulators in individual
countries, including the U.S. federal bank regulatory agencies (after notice and comment).
The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress.
Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum but below the conservation
buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.
As of December 31, 2022, our capital levels continue to exceed all capital adequacy requirements under the Basel
III Capital Rules as currently applicable to us.
On May 24, 2018, the EGRRCPA was enacted, and, among other things, it includes a simplified capital rule
change which effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage
ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies
must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8%
and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary
Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified
bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the Federal Reserve’s
Small Bank Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies.
65
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
On August 28, 2018, the Federal Reserve issued an interim final rule expanding the applicability of its Small Bank Holding
Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from
consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements.
Finally, for banks that continue to be subject to the risk-based capital rules of Basel III (e.g., 150%), certain commercial
real estate loans that were formally classified as high volatility commercial real estate 31 (“HVCRE”) will not be subject
to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction (“ADC”)
loans will generally be subject to heightened risk weights, certain exceptions will apply. On September 18, 2018, the
federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.
As of December 31, 2022, the most recent notification from the FDIC categorized all the Subsidiary Banks as
well-capitalized under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” we
must maintain minimum Total risk-based, Tier 1 risk based, and Tier 1 leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes have changed our categorization as
well-capitalized.
In December 2018, the federal bank regulators issued a final rule that would provide an optional three-year phase-
in period for the day-one regulatory capital effects of the adoption of ASU 2016-13 to ASC 326 “Financial Instruments –
Credit Losses,” as amended, on January 1, 2020. We did not elect to use the optional three-year phase-in period when we
adopted ASU 2016-13 to ASC 326 “Financial Instruments – Credit Losses,” as amended, on January 1, 2020.
Our actual capital amounts and ratios for 2022 under current guidelines are presented in the following table:
Actual
For Capital Adequacy
Purposes
Phase In Schedule
Amount
Ratio
Amount
Ratio
(greater than (greater than
or equal to)
or equal to)
(Dollars in Thousands)
To Be Well-Capitalized
Under Prompt Corrective
Action Provisions
Amount
(greater than
or equal to)
Ratio
(greater than
or equal to)
As of December 31, 2022:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,232,723
1,310,616
International Bank of Commerce, Laredo . . . . . . . .
363,093
International Bank of Commerce, Brownsville . . . .
232,689
International Bank of Commerce, Oklahoma . . . . .
98,087
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
71,418
International Bank of Commerce, Zapata . . . . . . . .
20.21 % $
18.07
20.86
21.17
42.26
37.70
773,398
507,625
121,855
76,941
16,248
13,261
Total Capital (to Risk Weighted Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,455,468
1,401,298
International Bank of Commerce, Laredo . . . . . . . .
383,804
International Bank of Commerce, Brownsville . . . .
243,739
International Bank of Commerce, Oklahoma . . . . .
100,798
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
73,420
International Bank of Commerce, Zapata . . . . . . . .
22.22 % $ 1,160,096
761,438
19.32
182,782
22.05
115,412
22.18
24,372
43.43
19,892
38.76
Tier 1 Capital (to Risk Weighted Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,324,903
1,310,616
International Bank of Commerce, Laredo . . . . . . . .
363,093
International Bank of Commerce, Brownsville . . . .
232,689
International Bank of Commerce, Oklahoma . . . . .
98,087
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
71,418
International Bank of Commerce, Zapata . . . . . . . .
Tier 1 Capital (to Average Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Bank of Commerce, Laredo . . . . . . . .
International Bank of Commerce, Brownsville . . . .
International Bank of Commerce, Oklahoma . . . . .
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
International Bank of Commerce, Zapata . . . . . . . .
$ 2,324,903
1,310,616
363,093
232,689
98,087
71,418
21.04 % $
18.07
20.86
21.17
42.26
37.70
14.59 % $
13.09
8.95
13.48
14.39
15.00
939,126
616,402
147,966
93,429
19,730
16,103
637,578
400,489
162,246
69,028
27,270
19,048
$
7.000 %
7.000
7.000
7.000
7.000
7.000
$
10.500 %
10.500
10.500
10.500
10.500
10.500
$
8.500 %
8.500
8.500
8.500
8.500
8.500
N/A
471,366
113,151
71,445
15,088
12,314
N/A
725,179
174,078
109,916
23,212
18,945
N/A
580,143
139,262
87,933
18,569
15,156
$
4.00 %
4.00
4.00
4.00
4.00
4.00
N/A
500,611
202,808
86,286
34,088
23,811
N/A
6.50 %
6.50
6.50
6.50
6.50
N/A
10.00 %
10.00
10.00
10.00
10.00
N/A
8.00 %
8.00
8.00
8.00
8.00
N/A
5.00 %
5.00
5.00
5.00
5.00
66
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Our actual capital amounts and ratios for 2021 are also presented in the following table:
Actual
Amount
Ratio
For Capital Adequacy
Purposes
To Be Well-Capitalized
Under Prompt Corrective
Action Provisions
Amount
(greater than
or equal to)
Ratio
(greater than
or equal to)
Amount
(greater than
or equal to)
Ratio
(greater than
or equal to)
(Dollars in Thousands)
As of December 31, 2021:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,057,928
20.47 % $
1,287,687
International Bank of Commerce, Laredo . . . . . . . .
19.74
315,957
International Bank of Commerce, Oklahoma . . . . .
19.80
221,567
International Bank of Commerce, Brownsville . . . .
18.59
46.06
102,375
International Bank of Commerce, Zapata . . . . . . . .
75,303 42.25
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
703,710
456,544
111,690
83,452
15,559
12,475
Total Capital (to Risk Weighted Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,284,579
22.73 % $ 1,055,565
684,816
20.97
1,367,487
International Bank of Commerce, Laredo . . . . . . . .
167,535
20.96
334,495
International Bank of Commerce, Oklahoma . . . . .
125,178
19.50
232,454
International Bank of Commerce, Brownsville . . . .
23,339
104,996
International Bank of Commerce, Zapata . . . . . . . .
47.24
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
18,713
77,354 43.40
Tier 1 Capital (to Risk Weighted Assets): . . . . . . . . . .
21.59 % $
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,170,682
19.74
1,287,687
International Bank of Commerce, Laredo . . . . . . . .
19.80
315,957
International Bank of Commerce, Oklahoma . . . . .
18.59
221,567
International Bank of Commerce, Brownsville . . . .
102,375
International Bank of Commerce, Zapata . . . . . . . .
46.06
75,303 42.25
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 Capital (to Average Assets):
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,170,682
13.94 % $
11.14
1,287,687
International Bank of Commerce, Laredo . . . . . . . .
20.17
315,957
International Bank of Commerce, Oklahoma . . . . .
11.49
221,567
International Bank of Commerce, Brownsville . . . .
16.10
102,375
International Bank of Commerce, Zapata . . . . . . . .
75,303 16.15
Commerce Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
854,505
554,375
135,623
101,334
18,893
15,149
622,671
462,225
62,663
77,164
25,441
18,651
(20) Fair Value
$
7.000 %
7.000
7.000
7.000
7.000
7.000
$
10.500 %
10.500
10.500
10.500
10.500
10.500
$
8.500 %
8.500
8.500
8.500
8.500
8.500
N/A
423,934
103,712
77,491
14,448
11,584
N/A
652,206
159,557
119,217
22,227
17,822
N/A
521,764
127,645
95,374
17,782
14,258
4.00 % $
4.00
4.00
4.00
4.00
4.00
N/A
577,781
78,329
96,455
31,801
23,314
N/A
6.50 %
6.50
6.50
6.50
6.50
N/A %
10.00
10.00
10.00
10.00
10.00
%
N/A
8.00
8.00
8.00
8.00
8.00 %
N/A
5.00
5.00
5.00
5.00
5.00
ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value
measurements. ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; it also establishes a fair value hierarchy that prioritizes
the inputs used in valuation methodologies into the following three levels:
Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Inputs—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose
value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques,
67
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
as well as instruments for which the determination of fair value requires significant management judgment
or estimation.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general
classification of such instruments pursuant to the valuation hierarchy is set forth below.
The following table represents financial instruments reported on the consolidated statements of condition at their
fair value as of December 31, 2022 by level within the fair value measurement hierarchy.
Fair Value Measurements at
Reporting Date Using
(Dollars in Thousands)
Quoted
Prices in
Active
Assets/Liabilities Markets for
Measured at
Fair Value
December 31, 2022
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . .
States and political subdivisions . . . . . . . . . . . . . . . . . . . .
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
49,393 $ —
—
—
5,358
$ 5,358
4,209,212
159,191
5,358
4,423,154
$
49,393 $
4,209,212
159,191
—
$ 4,417,796
$
—
—
—
—
—
The following table represents financial instruments reported on the consolidated balance sheets at their fair value
as of December 31, 2021 by level within the fair value measurement hierarchy.
Fair Value Measurements at
Reporting Date Using
(Dollars in Thousands)
Quoted
Prices in
Active
Assets/Liabilities Markets for
Measured at
Fair Value
December 31, 2021
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage - backed securities . . . . . . . . . . . . . $
States and political subdivisions . . . . . . . . . . . . . . . . . . . .
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4,169,363 $
44,557
6,079
4,219,999
—
—
6,079
$ 6,079
$ 4,169,363 $
44,557
—
$ 4,213,920
$
—
—
—
—
For the years ended December 31, 2022 and December 31, 2021, debt investment securities available-for-sale are
classified within Level 2 of the valuation hierarchy. Equity securities with readily determinable fair values are classified
within Level 1. For debt securities classified as Level 2 in the fair value hierarchy, we obtain fair value measurements
from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes,
market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information and the bond’s terms and conditions, among other things.
68
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Certain financial instruments are measured at fair value on a nonrecurring basis. They are not measured at fair
value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is
evidence of impairment).
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for
the period ended December 31, 2022 by level within the fair value measurement hierarchy:
Fair Value Measurements at Reporting
Date Using
(Dollars in thousands)
Assets/Liabilities
Measured at
Fair Value
Period ended
December 31,
2022
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Net (Credit)
Provision
During
Period
Measured on a non-recurring basis:
Assets:
Watch-List doubtful loans . . . . . . . . . . . . . . . . .
Other real estate owned. . . . . . . . . . . . . . . . . . . .
$
$
30,743 $
5,653 $
—
—
$
$
—
—
$
$
30,743
5,653
$
$
2,346
1,627
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for
the year ended December 31, 2021 by level within the fair value measurement hierarchy:
Fair Value Measurements at Reporting
Date Using
(Dollars in thousands)
Assets/Liabilities
Measured at
Fair Value
Year ended
December 31,
2021
Quoted
Prices in
Active
Markets
Significant
Other
for Identical Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Assets
(Level 1)
Significant
Net Provision
(Credit)
During
Period
Measured on a non-recurring basis:
Assets:
Watch-List doubtful loans . . . . . . . . . . . . . . . . . $
Other real estate owned. . . . . . . . . . . . . . . . . . . . $
55 $
18,095 $
—
—
$
$
—
—
$
$
55
18,095
$
$
209
2,655
Our assets measured at fair value on a non-recurring basis are limited to loans classified as Watch List – Doubtful
and other real estate owned. The fair value of Watch-List Doubtful loans is derived in accordance with FASB ASC 310,
“Receivables”. They are primarily comprised of collateral-dependent commercial loans. As the primary sources of loan
repayments decline, the secondary repayment source, the collateral, takes on greater significance. Correctly evaluating the
fair value becomes even more important. Re-measurement of the loan to fair value is done through a specific valuation
allowance included in the ACL. The fair value of the loan is based on the fair value of the collateral, as determined through
either an appraisal or evaluation process. The basis for our appraisal and appraisal review process is based on regulatory
guidelines and strives to comply with all regulatory appraisal laws, regulations, and the Uniform Standards of Professional
Appraisal Practice. All appraisals and evaluations are “as is” (the property’s highest and best use) valuations based on the
current conditions of the property/project at that point in time. The determination of the fair value of the collateral is based
on the net realizable value, which is the appraised value less any closing costs, when applicable. As of December 31, 2022,
we had approximately $51,326,000 of doubtful commercial collateral dependent loans, of which approximately $0 had an
appraisal performed within the immediately preceding twelve months and of which approximately $51,326,000 had an
evaluation performed within the immediately preceding twelve months. As of December 31, 2021, we had approximately
$993,000 of doubtful commercial collateral dependent loans, of which approximately $0 had an appraisal performed within
69
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
the immediately preceding twelve months and of which approximately $896,000 had an evaluation performed within the
immediately preceding twelve months.
The determination to either seek an appraisal or to perform an evaluation begins in weekly credit quality meetings,
where the committee analyzes the existing collateral values of the doubtful loans and where obsolete appraisals are
identified. In order to determine whether we would obtain a new appraisal or perform an internal evaluation to determine
the fair value of the collateral, the credit committee reviews the existing appraisal to determine if the collateral value is
reasonable in view of the current use of the collateral and the economic environment related to the collateral. If the analysis
of the existing appraisal does not find that the collateral value is reasonable under the current circumstances, we would
obtain a new appraisal on the collateral or perform an internal evaluation of the collateral. The ultimate decision to get a
new appraisal rests with the independent credit administration group. A new appraisal is not required if an internal
evaluation, as performed by in-house experts, is able to appropriately update the original appraisal assumptions to reflect
current market conditions and provide an estimate of the collateral’s market value for impairment analysis. The internal
evaluations must be in writing and contain sufficient information detailing the analysis, assumptions and conclusions and
they must support performing an evaluation in lieu of ordering a new appraisal.
Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other
real estate owned is carried at the lower of the recorded investment in the property or its fair value less estimated costs to
sell such property (as determined by independent appraisal) within Level 3 of the fair value hierarchy. Prior to foreclosure,
the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the ACL
(formerly allowance for probable loan losses), if necessary. The fair value is reviewed periodically, and subsequent write
downs are made accordingly through a charge to operations. Other real estate owned is included in other assets on the
consolidated financial statements. For the twelve months ended December 31, 2022, 2021 and 2020, we recorded
approximately $2,000, $2,000 and $22,000, respectively, in charges to the ACL in connection with loans transferred to
other real estate owned. For the twelve months ended December 31, 2022, 2021 and 2020, we recorded approximately
$1,627,000, $2,655,000 and $1,539,000, respectively, in adjustments to fair value in connection with other real estate
owned.
The fair value estimates, methods, and assumptions for our financial instruments at December 31, 2022 and
December 31, 2021 are outlined below.
Cash and Cash Equivalents
For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment securities held-to-maturity
The carrying amounts of investments held-to-maturity approximate fair value.
Investment Securities
For debt investment securities, which may include U.S. Treasury securities, obligations of other U.S. government
agencies, obligations of states and political subdivisions and mortgage pass through and related securities, fair values are
from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes,
market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information and the bond’s terms and conditions, among other things. See disclosures of fair
value of investment securities in Note 2.
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by
type such as commercial, real estate and consumer loans as outlined by regulatory reporting guidelines. Each category is
segmented into fixed and variable interest rate terms and by performing and non-performing categories.
70
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
For variable rate performing loans, the carrying amount approximates the fair value. For fixed rate performing
loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.
For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for
prepayment estimates using discount rates based on secondary market sources or the primary origination market. Fixed
rate performing loans are within Level 3 of the fair value hierarchy. At December 31, 2022 and December 31, 2021, the
carrying amount of fixed rate performing loans was $1,203,381,000 and $1,363,313,000, respectively, and the estimated
fair value was $1,100,848,000 and $1,323,223,000, respectively.
Accrued Interest
The carrying amounts of accrued interest approximate fair value.
Deposits
The fair value of deposits with no stated maturity, such as non-interest bearing demand deposit accounts, savings
accounts and interest-bearing demand deposit accounts, was equal to the amount payable on demand as of December 31,
2022 and December 31, 2021. The fair value of time deposits is based on the discounted value of contractual cash flows.
The discount rate is based on currently offered rates. Time deposits are within Level 3 of the fair value hierarchy. At
December 31, 2022 and December 31, 2021, the carrying amount of time deposits was $2,068,184,000 and
$2,188,803,000, respectively, and the estimated fair value was $2,076,231,000 and $2,186,547,000, respectively.
Securities Sold Under Repurchase Agreements
Securities sold under repurchase agreements are short-term maturities. Due to the contractual terms of the
instruments, the carrying amounts approximated fair value at December 31, 2022 and December 31, 2021.
Junior Subordinated Deferrable Interest Debentures
We currently have floating rate junior subordinated deferrable interest debentures outstanding. Due to the
contractual terms of the floating rate junior subordinated deferrable interest debentures, the carrying amounts approximated
fair value at December 31, 2022 and December 31, 2021.
Other Borrowed Funds
We currently have long-term borrowings issued from the Federal Home Loan Bank (“FHLB”). The long-term
borrowings outstanding at December 31, 2022 and December 31, 2021 are fixed-rate borrowings and the fair value is
based on established market spreads for similar types of borrowings. The fixed-rate long-term borrowings are included in
Level 2 of the fair value hierarchy. At December 31, 2022 and December 31, 2021 the carrying amount of the fixed-rate
long-term FHLB borrowings was $10,944,000 and $436,138,000, respectively, and the estimated fair value was
$10,944,000 and $455,187,000, respectively.
Commitments to Extend Credit and Letters of Credit
Commitments to extend credit and fund letters of credit are principally at current interest rates and therefore the
carrying amount approximates fair value.
Limitations
Fair value estimates are made at a point in time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one
time of our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our
financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current
71
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and off-statement of condition financial instruments without
attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include
the bank premises and equipment and core deposit value. In addition, the tax ramifications related to the effect of fair value
estimates have not been considered in the above estimates.
72
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(21) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Condition
(Parent Company Only)
December 31, 2022 and 2021
(Dollars in Thousands)
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Junior subordinated deferrable interest debentures . . . . . . . . . . . . . . . . . . . .
Due to IBC Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Shareholders’ equity:
Common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . .
Less cost of shares in treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2022
2021
89,263
114,901
42,519
1,933,269
3,365
7,181
2,190,498
134,642
21
11,076
145,739
96,420
154,061
2,695,567
(470,497)
2,475,551
(430,792)
2,044,759
2,190,498
$
$
$
$
62,564
90,555
10,401
2,281,597
3,365
1,644
2,450,126
134,642
21
6,982
141,645
96,351
152,144
2,470,710
(31,980)
2,687,225
(378,744)
2,308,481
2,450,126
73
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(22) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Income
(Parent Company Only)
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands)
2022
2021
2020
Income:
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income on notes receivable . . . . . . . . . . . . . . . . . . . . . .
Interest income (loss) on other investments . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
222,175
2,394
8,662
857
234,088
Expenses:
Interest expense (Debentures) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before federal income taxes and equity in
5,037
437
2,291
7,765
80,882
1,139
9,662
58
91,741
2,792
—
2,272
5,064
$
130,950
357
(1,126)
5
130,186
3,832
27
1,988
5,847
undistributed net income of subsidiaries. . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,323
504
86,677
1,358
124,339
(1,339)
Income before equity in undistributed net income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in undistributed net income of subsidiaries . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
225,819
74,413
300,232
$
85,319
168,603
253,922
$
125,678
41,641
167,319
74
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(23) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Cash Flows
(Parent Company Only)
Years ended December 31, 2022, 2021 and 2020
(Dollars in Thousands)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss (gain) on equity securities with
readily determinable fair values. . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . .
Equity in undistributed net income of subsidiaries . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . .
Investing activities:
Net (increase) decrease in notes receivable . . . . . . . . . . . . . . . .
(Decrease) increase in other assets and other investments . . . .
Net cash (used in) provided by investing activities . . . . . . . . . .
Financing activities:
2022
2021
2020
$
300,232
$
253,922
$
167,319
437
—
27
36
449
1,743
(74,413)
228,484
(32,556)
(43,343)
(75,899)
(51)
506
(8,084)
(168,603)
77,690
1,549
(11,787)
(10,238)
22
743
2,467
(41,641)
128,937
—
31,289
31,289
Proceeds from stock transactions . . . . . . . . . . . . . . . . . . . . . . . .
Payments of cash dividends - common. . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,537
(75,375)
(52,048)
(125,886)
26,699
62,564
89,263 $
2,414
(72,838)
(716)
(71,140)
(3,688)
66,252
62,564 $
542
(69,928)
(48,878)
(118,264)
41,962
24,290
66,252
75
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Quarterly Income Statements
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
2022
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for probable loan losses . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 174,678
15,217
159,461
7,910
45,778
62,422
145,087
9,870
135,217
8,525
54,602
75,173
109,584
6,683
102,901
3,735
43,242
68,756
96,432
6,386
90,046
1,481
43,512
64,118
Income before income taxes. . . . . . . . . . . . . . . . . . . . . .
134,907
106,121
73,652
67,959
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,495
22,765
15,681
14,466
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 105,412
$
83,356
$
57,971
$
53,493
Per common share:
Basic
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.69 $
1.34 $
0.92 $
0.84
Diluted
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.68 $
1.34 $
0.92 $
0.84
76
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Quarterly Income Statements
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
2021
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for probable loan losses . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 101,058
6,613
94,445
2,818
40,974
61,450
101,192
6,682
94,510
2,801
47,209
69,727
97,979
6,671
91,308
1,144
97,906
69,954
97,874
6,865
91,009
1,192
36,237
62,185
Income before income taxes. . . . . . . . . . . . . . . . . . . . . .
71,151
69,191
118,116
63,869
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,625
14,592
26,090
13,098
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
56,526 $
54,599 $
92,026 $
50,771
Per common share:
Basic
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.90 $
0.86 $
1.45 $
0.80
Diluted
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.89 $
0.86 $
1.45 $
0.80
77
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Average Statements of Condition
(Dollars in Thousands)
(Unaudited)
Distribution of Assets, Liabilities and Shareholders’ Equity
The following table sets forth a comparative summary of average interest earning assets and average interest-
bearing liabilities and related interest yields for the years ended December 31, 2022, 2021, and 2020. Tax-exempt income
has not been adjusted to a tax-equivalent basis:
2022
2021
2020
Average
Balance
Average
Interest Rate/Cost
Average
Balance
Average
Interest Rate/Cost
Average
Balance
Average
Interest Rate/Cost
(Dollars in Thousands)
Assets
Interest earning assets:
Loan, net of unearned discounts:
Domestic. . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . .
$ 6,977,890
138,262
397,356
4,821
5.69 % $ 7,318,756
123,524
3.49
355,125
4,090
4.85 % $ 7,290,230
125,234
3.31
372,903
4,676
Investment securities:
Taxable . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Total interest-earning assets . . . .
4,510,293
70,636
2,831,040
14,528,121
74,988
2,541
46,075
525,781
3,624,903
1.66
43,906
3.60
1.63
2,449,193
3.62 % 13,560,282
34,331
1,483
3,074
398,103
3,213,039
0.95
67,487
3.38
0.13
767,837
2.94 % 11,463,827
46,095
2,434
900
427,008
5.12 %
3.73
1.43
3.61
0.12
3.72 %
Non-interest earning assets:
Cash and cash equivalents. . . . . . . . .
Bank premises and equipment, net . . .
Other assets . . . . . . . . . . . . . . . . . .
Less allowance for probable loan
365,194
415,883
1,203,790
losses . . . . . . . . . . . . . . . . . . . . .
(116,188)
Total . . . . . . . . . . . . . . . . . . . . $ 16,396,800
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Savings and interest-bearing
204,747
442,281
1,021,644
(111,791)
$ 15,117,163
174,557
465,267
1,118,561
(89,558)
$ 13,132,654
demand deposits . . . . . . . . . . . . .
$ 4,667,048
12,686
0.27 % $ 4,297,561
4,110
0.10 % $ 3,537,014
6,358
0.18 %
Time deposits:
Domestic. . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . .
Securities sold under repurchase
agreements . . . . . . . . . . . . . . . . .
Other borrowings. . . . . . . . . . . . . . .
Junior subordinated interest
deferrable debentures . . . . . . . . . .
Total interest-bearing liabilities . . .
1,020,388
1,139,209
476,877
386,924
6,555
4,602
2,495
6,781
0.64
0.40
0.52
1.75
1,077,371
1,083,866
411,661
436,226
7,636
4,019
621
7,654
0.71
0.37
0.15
1.75
1,003,221
1,068,907
10,608
8,622
335,392
547,283
926
8,773
1.06
0.81
0.28
1.60
134,642
7,825,088
5,037
38,156
3.74
134,642
0.49 % 7,441,327
2,791
26,831
2.07
134,642
0.36 % 6,626,459
3,832
39,119
2.85
0.59 %
Non-interest-bearing liabilities:
Demand Deposits . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . .
5,973,462
200,013
2,398,237
Total. . . . . . . . . . . . . . . . . . . . . . $ 16,396,800
Net interest income . . . . . . . . . . . . .
Net yield on interest earning assets. . .
5,355,105
70,601
2,250,130
$ 15,117,163
4,211,988
166,213
2,127,994
$ 13,132,654
$ 487,625
$ 371,272
$ 387,889
3.36 %
2.74 %
3.38 %
78
INTERNATIONAL BANCSHARES CORPORATION
OFFICERS AND DIRECTORS
OFFICERS
DIRECTORS
DENNIS E. NIXON
Chairman of the Board and President
JUDITH I. WAWROSKI
Chief Accounting Officer and Treasurer
DALIA F. MARTINEZ
Vice President
MIRTA SALCEDO
Auditor
MARISA V. SANTOS
Secretary
HILDA V. TORRES
Assistant Secretary
DENNIS E. NIXON
Chairman of the Board
International Bank of Commerce
JAVIER DE ANDA
Senior Vice President
B.P. Newman Investment Company
DOUG HOWLAND
Investments
RUDOLPH M. MILES
Investments
LARRY NORTON
Investments
ROBERTO R. RESENDEZ
Investments
ANTONIO R. SANCHEZ, JR.
Chairman of the Board
Sanchez Oil & Gas Corporation
Investments
DIANA G. ZUNIGA
President and Owner
Investors Alliance, Inc.
79
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